How Duterte’s foreign policy is impacting Philippines property

Is President Duterte’s political balancing between US and China cause for concern for the property industry?

In the last few months that President Rodrigo Duterte has held the helm as the President of the Philippines, we have seen significant changes to the Philippines foreign policy that include a seeming disengagement with the United States of America and a renewal of ties with China and Russia. On 21st October, 2016, he announced, while on a visit to Beijing, a “separation from the United States, both in military and economic [matters]”. This has caused much concern and investor confidence took a hit.

While the immediate slump of the stock market and the weakening of the Peso to a seven-year low might be seen as short term knee-jerk reactions, what we should be more concerned about is the possible ramifications of such a position on Philippines economy and trade.

The US continues to be one of the largest export markets for the Philippines and was the second largest in 2015 at 15% behind Japan (21.1%). In total trade terms, Japan remains the largest trading partner followed by China which is also the largest import partner for the Philippines. Given the growing appetite of China for trade and presence in Asia, we can certainly understand the need for the Philippines to balance itself between its import and export partners.

BPO & OFW FACTOR

Despite the current global uncertainties, the Philippines remains one of the best performing economies this year with its GDP growing at 7% YoY in 2Q 2016. The main drivers of the current Philippines economy are Overseas Filipino Workers remittances (OFW), Business Process Outsourcing (BPO) and Foreign Direct Investment (FDI). All three sectors are prospering with OFW remittances projected to increase by 3% to US$26.6 bil. BPO is projected to grow by 17% to US$24 bil in 2016 while FDI tripled to US$3.5 bil in the first four months of 2016 as compared with 2015. There is a pivotal shift in the economy with BPO set to overtake OFW in 2017 if current growth is maintained, a feat achieved with a young, English-literate workforce and Special Economic Zones set up since 1995.

For Subscriber Only


Subscribe Now

or Login to read the full content

0 Comment
Advertisement:
Advertisement: