Nation at a Glance — (01/08/18)
News stories from across the nation. Visit www.bworldonline.com (section: The Nation) to read more national and regional news from the Philippines.
Headline inflation rates in the Philippines, all items
THE GENERAL INCREASE in prices of widely used goods and services sustained its pace in December from the preceding month, the government reported on Friday, even as core inflation eased to a four-month low. Read the full story.
Healthy factory output keeps outlook bright
THE COUNTRY’S manufacturing sector continued to show robust growth last year, sustaining the optimism of its potential in generating employment and promoting inclusive growth.
The sector’s output growth based on gross value added (or GVA, at constant 2000 prices) expanded 7% for the entire 2016, up from the 5.7% recorded in 2015, data from the Philippine Statistics Authority (PSA) showed.
Most of the manufacturing subcomponents registered growth with double-digit increases seen in office, accounting and computing machinery (with a 43% growth), basic metal industries (40.5%), machinery and equipment except electrical (24.9%), transport equipment (24.4%), rubber and plastic products (24.4%); wood, bamboo, cane and rattan articles (18.5%); and electrical machinery and apparatus (12.5%).
Food manufactures, which made up more than a third of manufacturing GVA, grew 8.2% in 2016, an improvement over the 1.6% figure in 2015.
Analysts have long emphasized the importance of manufacturing’s “spillover effect” to other industries as a means to achieve sustained and inclusive growth, with the sector said to provide productive jobs to semi-skilled and skilled workers.
As a result, the Department of Trade and Industry expected the sector to grow 8-10% each until the end of the government’s term, with Trade Secretary Ramon M. Lopez noting that momentum has been building in the sector since 2013.
Last year, factory output growth based on the PSA’s Monthly Integrated Survey of Selected Industries averaged 11.5%, well-above the 8-10% target.
“The Philippines is now on the verge of economic transformation; while services [sector] was the main driver of growth in the past decades, manufacturing has been playing an important role and has been contributing substantially to economic growth since 2013. In the third quarter of 2016, manufacturing grew by 6.9%, more than one percentage point higher than the rate posted in the same period in 2015 (5.8%),” Mr. Lopez said in his speech to delegates of the Manufacturing Summit at the Makati Shangri-La in November last year.
Mr. Lopez added that from 2013 onwards, third quarter manufacturing growth was 7.3% outpacing that of services which grew at an average of 6.7%.
Moving forward, Mr. Lopez said that the Trade department will focus on industries where the country is said to have comparative advantage in employment generation with manufacturing being one of the department’s priority sectors along with agribusiness, information technology-business process management, tourism, and infrastructure and logistics. — Jochebed B. Gonzales
Utilities grow faster on increased demand
OUTPUT growth by the electricity, gas, and water sector hastened in 2016 brought by increased demand for these utilities.
Philippine Statistics Authority data showed that the sector’s gross value added (GVA) increased by 9.8% to P271.22 billion in 2016. This was faster than the 5.7% growth rate recorded in 2015 and was the fastest since 2010, when the sector posted 9.91%.
The electricity subsector saw its GVA rise by 10.44% to P235.61 billion last year and accounted for 86.87% of the sector’s total value.
On the other hand, water companies’ output increased 6.1% to P23.92 billion, while the steam industry’s GVA expanded by 5.4% to P11.69 billion. Water and steam subsectors accounted for 8.8% and 4.3% of the sector’s aggregate output, respectively.
Data from the Department of Energy (DoE) show total sales going up 9.4% to 74,153 gigawatt-hours (GWh) in 2016. Total electricity consumption also rose by 10.2% to 90,798 GWh. As of July 2016, households with access to electricity stood at 20.36 million, or 89.6% of the total.
In its 2016 Philippine Power Situation Report, DoE attributed the increase in electricity consumption to the rise in temperature made worse by the El Niño, national and local elections held in May, entry of power generating plants, and increase in demand brought by economic growth.
Power demand-supply remained stable in the first three months of 2016 despite the occurrence of El Niño, the Energy department said in its annual report. However, in April and May, yellow and red alerts were declared in Luzon and the Visayas. In Mindanao, hydro capacities declined.
According to the DoE, El Niño Mitigation Measures and preparation for the May elections stabilized the situation. The DoE said some of the measures were: “activation of the Interruptible Load Program, ensuring minimal force outages, management of power plant maintenance schedules and optimization of hydro capacities specifically in Mindanao.”
Manila Electric Co., the country’s largest power distributor, reported a net income of P19.2 billion last year, marginally higher than the P19.1 billion posted in 2015, citing an increase in electricity volume sales and higher financing income. Excluding exceptional items, core net income reached P19.6 billion, higher by 4% compared with P18.9 billion a year earlier due mainly to an 8% increase in electric consumption.
On the other hand, Maynilad Water Services, Inc.’s core profit fell 26% to P7.2 billion from P9.7 billion, while Manila Water Co., Inc. reported a 2% increase in net income in 2016 to P6.07 billion from P5.96 billion a year ago, with the company maintaining growth in its service connections at 3% as it breached the million mark at 1,008,918 last year. — Christine Joyce S. Castañeda
Public projects boost sector’s expansion
THE INCREASE in building projects amid strong demand in high rise residential and commercial properties made the construction sector one of the country’s growth drivers last year.
Philippine Statistics Authority data showed that the sector’s gross value added, or the contribution of a sector to gross domestic product (GDP), grew 13.7% to P519.70 billion, faster than the previous year’s 11.6%. This is the fastest among other sectors for the year as well as the only one that posted double-digit growth figures.
Leading the charge was public construction, which posted double-digit growth figures for the entire year — expanding as fast as 38.5% in the first three months of 2016 before tapering into the fourth quarter which recorded a lower albeit still robust 19.2% growth. For the year, it grew by 28%, surpassing 2015’s 25.5%.
The same trend could be seen in private construction, but it nevertheless posted 11.5% growth last year, beating the 7.6% reading in the year before.
On a quarterly basis, public construction has been growing by seven quarters straight (since the second quarter of 2015). This was after the time the government has cut back on infrastructure spending in 2014. On the other hand, private construction’s growth streak extended to 11 quarters as of 2016.
In terms of its contribution to employment, the sector’s share to the country’s total employment is 8.2% with 3.37 million workers said to be employed in the sector during the period. The figure represented a 25% increase as compared to some 2.69 million workers in 2015.
In a report released by the Construction Industry Authority of the Philippines for the year, the robust growth figure in public construction was attributed to an increase in government spending “as it fast-tracks implementation of infrastructure projects of the Aquino administration and the Golden Infrastructure projects of the Duterte administration.” Similarly, the increase in demand for high-rise residential and commercial buildings were cited for the growth in private construction.
Looking forward, the sector is said to accelerate further as much hope is placed in the current administration’s “Build, Build, Build” program. This year, the government appropriated P847.2 billion (or 5.3% of GDP) in the 2017 National Budget for infrastructure projects.
Under this arrangement, the government will spend some P8 trillion-P9 trillion for the next six years, representing a rise to around 7.4% of GDP in 2022 from the planned 5.3% of GDP this year. The figure is a far cry to previous years when infrastructure spending averaged some 3% of GDP. The government has said that the program will be financed through expansionary fiscal deficits and through the planned tax reform which will increase higher revenue collection efforts. – Leo Jaymar G. Uy
Consumption lifted by remittances, lending
GROWTH in wholesale and retail trade was sustained last year on strong consumption supported by the increasing presence of online platforms for buying and selling.
According to government data, gross value added in trade and repair of motor vehicles, motorcycles, personal and household goods grew 7.2% year on year, inching up from 2015’s 7.1%.
Accounting for nearly 80% of the total output in the sector, the retail trade sub-group expanded 6.5% last year, 0.4 percentage points higher than the year prior.
Growth in wholesale trade was strong as well albeit decelerating to 9.8% from the 11.2% it recorded in 2015. Meanwhile, the maintenance and repair of motor vehicles, motorcycles, personal and household goods was recorded at 11.3% from 13.1% previously.
Nevertheless, consumption, which accounts for around two-thirds of the country’s gross domestic product, remained one of the country’s growth drivers, rising 7% in 2016 from 6.3% in 2015. Remittances from overseas Filipinos, known to support local consumption, grew 5% year on year, the fastest since a 7.2% annualized increase posted in 2014, and beating the central bank’s forecast of a 4% climb for the year.
Analysts attributed this sustained growth in household consumption to high consumer confidence, modest inflation as well as favorable labor market conditions.
Another factor is the country’s modest interest rates fueling households’ and corporates’ propensity to borrow. Central bank data show household credit totaled P780.81 billion in 2016, soaring by 22.5% from the P637.51 billion extended by banks a year ago. Since 2010, consumer loans have been growing by double digits, with the total breaching the P1-trillion mark in 2015 given a surge in borrowings to acquire cars and homes.
Rising consumer credit comes on top of increased lending for corporates, especially now that the government is pursuing an infrastructure push with big-ticket projects on the pipeline. – Jochebed B. Gonzales
Communications lead sectors’ slower growth
THE TRANSPORTATION, storage, and communication industry slackened in 2016, with decelerations observed almost across all sectors.
Contributing around 8% to economic output, the industry slackened to a 5.9% growth last year with a gross value added of P615.71 billion from the P581.29 billion posted in 2015.
Growth in communications grew 4.3% to P364.45 billion in 2016, slower than the 7.8% posted in the year prior although the subsector still comprise more than half of the industry’s gross value added.
Meanwhile, transport and storage kept steady at 8.4% to P251.25 billion.
Broken down, air transport was the top growth driver with 13.6% to P30.45 billion in 2016 although it was a slight slowdown from the 14.9% netted in 2015. Second place was “storage and services incidental to transport” which accelerated 8.5% to P68.24 billion from the previous 7.5%.
Growth of land transport was 7.6% (from 7.5%) while that of water transport was 6.2% (from 8.3%).
The sector’s mixed results was reflected in the performance of its big players.
PLDT, Inc. reported a P27.85-billion consolidated core income in 2016, 20.9% lower than the previous year, due to lower earnings before interest, tax, depreciation and amortization or EBITDA and higher costs from its capital expenditures which was used to fund ongoing expansion in its fixed and mobile businesses. Its recurring core income — which strips out asset sales, depreciation, one-time provisions, and subsidies — reached P20.19 billion.
Ayala-led Globe Telecom, Inc., on the other hand, saw its core net income rise by an annual 6.1%, driven by growth in its data-related products and continued uptick in both its mobile and broadband subscribers. However, its net income dipped 3.75% to P15.88 billion in 2016 from the P16.48 billion recorded in 2015 amid a general slowdown in traditional legacy business and non-operating charges related to its acquisition of San Miguel Corp.’s telecommunications assets.
Meanwhile, PAL Holdings, Inc., the listed operator of Philippine Airlines saw total revenues and the number of passengers increase 7.1% and 12.2% in 2016, respectively.
Its profit during the period was down 38.8% to P3.59 billion from 2015’s P5.87 billion on account of rising operating expenses.
On the other hand, the country’s auto sales grew 24.6% last year, sustaining a run of double-digit growth for the industry.
Data jointly released by the Chamber of Automotive Manufacturers of the Philippines, Inc. and Truck Manufacturers Association showed that member companies sold a total of 359,572 units last year, up from the 288,609 units recorded in 2015. The two groups surpassed their 2015 sales total last October and beat the groups’ 2016 target of 329,300 units by 12.4%.
Broadcasting companies also saw earnings up last year on account of election-related advertisements. ABS-CBN Corp.’s net income was recorded at P3.52 billion for the year, up 38.5% from the previous year while that of GMA Network, Inc. rose 71.5% to P3.65 billion. — Arianne Kristel R. Pelagio
Banks’ performance beats last year’s results
BANKS, insurance firms, and other financial companies posted higher output in 2016 in large part due to increased lending activities.
Data from the Philippine Statistics Authority showed that the gross value added (GVA) of the financial intermediation sector increased by 7.6% to P588.17 billion last year, outpacing the 6.06% growth in 2015.
Among the subsectors, banking institutions — which accounted for a chunk of the sector’s total output at 45.4% — posted the highest improvement in GVA at 9.2% to P267.26 billion last year. It was followed by other financial firms doing “activities auxiliary to financial intermediation” which grew by 7.4% to P32.30 billion and making up 5.5% of the sectoral total.
For its part, the insurance subsector saw its GVA rise by 7.2% to P101.08 billion while non-bank financial intermediation increased by 5.6% to P187.53 billion. The insurance and non-bank financial intermediation sectors, respectively, make up 17.2% and 31.9% of the sectoral total.
The year 2016 was a good one for the Philippine banking industry as it was able to book a record profit during the year on the back of higher deposits and loans while having a lower share of soured debts from a year ago.
Cumulative bottom line among banks was P154.13 billion, 13.9% higher than the P135.34 billion recorded in 2015, according to data from the Bangko Sentral ng Pilipinas (BSP). In particular, universal and commercial banks (UK/Bs) accounted for the bulk of the amount with a P136.96-billion income, up 13.9% from the P120.28 billion in 2015.
Consumer loans continue to be the banks’ bread and butter with UK/Bs and thrift banks having lent P1.27 trillion in consumer loans to households last year, which was 19.9% higher than the P1.06 trillion recorded in the year prior. Loans booked for housing lots was up 17.1% to P519.90 billion, while motor vehicle loans increased by 27.8% to P388.36 billion last year due to increased demand for private transport and flexible payment options offered to buyers.
Consumer credit is widely expected to rise further amid the optimism arising from the government’s infrastructure push with big-ticket projects on the pipeline.
On the other hand, the insurance industry’s total premium income was flat last year according to quarterly reports submitted by the life and non-life insurance companies to the Insurance Commission. The industry’s total income from premiums for 2016 was P231.88 billion which was up 0.3% from 2015 — below the targeted P280 billion-P300 billion worth of premiums for the year.
The life insurance sector’s total premiums was down 3.0% in 2016, which was attributed to the decline of premium production in variable life insurance products which were allocated in the Philippine stock market.
Non-life insurance companies absorbed some of the losses as their net premium incomes grew 16.2% for the year. — Christine Joyce S. Castañeda
Sustained demand keeps real estate robust
THE REAL ESTATE sector remained strong in 2016 driven by sustained demand for residential properties and office space against the backdrop of a booming economy.
The real estate, renting and business sector continues to be one of the main growth drivers with gross value added reporting an 8.9% growth to P930.56 billion in 2016, higher than the 7.1% expansion it registered in 2015, and the services sector’s average growth of 7.4% in 2016.
For real estate sector alone, it grew by 6.9% to P222.03 billion from P207.70 billion in 2015, while that of business process outsourcing, renting, and other business activities grew by 14.7% to P417.84 billion, higher than 9.6% in 2015. Likewise, ownership of dwellings grew by 2.8% to P290.69 billion.
In its fourth quarter report, real estate consultancy firm Colliers International attributed the sector’s robust growth to three major drivers: influx of offshore gaming companies, continuous expansion of information technology and business process management (IT-BPM) firms, and tenants’ search for “flight-to-quality” opportunities.
A total of 676,000 square meters (sq. m.) of office space was taken-up in central business districts in the metro in 2016, up 7% compared to 2015.
“The market was still primarily driven by IT-BPM companies. Close to 60% of take-up across Metro Manila came from IT-BPM companies. Non-BPO companies comprised 32%, while the balance came from off-shore gaming companies,” Colliers said.
Colliers added that around 85,000 square meters worth of office space was occupied by offshore gaming companies in 2016, most of which came in the fourth quarter.
“The Philippine Amusement and Gaming Corp. (Pagcor) has launched POGO (Philippine Offshore Gaming Operators) late last year, initially setting 25 POGO licenses but with a potential to increase to 50 in the next six months,” Colliers International said in its forecast for the local property industry this year.
On the heels of his oath taking last year, President Rodrigo R. Duterte planned to put an end to online gambling in the country. This led Pagcor to stop renewing online gaming licenses and since then has relied on offshore gaming licenses as a new source of revenue.
“In the last quarter of 2016, there was a surge in inquiries from offshore gaming companies, each with a minimum requirement of 10,000 square meters taking BPO spaces,” said Colliers.
In its quarterly residential report, Colliers noted that pre-selling take-up of condominium units — an indicator for future growth — picked up after four straight years of decline, with total take-up for 2016 reaching 38,800 units.
Total licenses to sell issued by the Housing and Land Use Regulatory Board rose 15.2% to 473,210 units last year from 410,834 units in 2015, with middle- and high-end condominium units increasing 44.6% to 94,142 units from 65,104 units.
“Take-up has been strong across unit sizes as previous years’ launches are also sold,” Colliers said, citing the favorable interest rate environment.
On the flip side, the real estate services firm reported soft sales take-up in Metro Manila’s secondary residential market amid the influx of new supply across submarkets.
For 2016, take-up only amounted to 2,000 units, 70% lower than the take-up the previous year with Colliers saying that developments in “fringe locations” have become viable alternatives to projects in the central business districts (CBDs). Fringe area completions in 2016 reached 4,800 units, higher than the 3,900 in CBDs.
A separate report by property services and advisory firm CBRE Philippines, Inc. shared a similar view, saying that the southern part of Metro Manila now poses itself as an ideal location for residential, commercial, and office projects.
Furthermore, “uncertainties” in the current administration did not induce unfavorable sentiments among the players in the office sector, CBRE said, adding that foreign investors remain confident about the country’s BPO industry. — Ranier Olson R. Reusora
Casinos, resorts remain strong despite setbacks
THE COMMUNITY, business, and social services sector’s growth experienced a tempered uptick in 2016.
The sector’s gross value added (GVA) — a measure of the value of goods and services produced by a sector — increased by 7.3% to P841.70 billion in 2016, the Philippine Statistics Authority data showed.
The growth logged by the sector in 2016, however, was slower than the previous year’s 8.3%.
All subsectors posted growth, but slower pace was recorded for the recreational, cultural, and sporting activities and the health and social work, dragging the overall performance of the sector.
Recreational, cultural, and sporting activities’ output — accounting for a fifth of the total sector’s production — increased by 7.7% in 2016 to P182.11 billion, slacking the most from the 12.4% increment recorded in 2015.
The Philippine gaming sector was in the spotlight last year after its casinos figured in the Bangladesh central bank hacking incident. Hackers in February last year transferred $81 million from the Bangladesh Bank’s account with the Federal Reserve Bank of New York to a Philippine bank. The stolen money was then withdrawn and transferred to casinos, where the money trail ended.
Out of the stolen $81 million, about $15 million has been returned to the Bangladesh government.
The incident prompted the government to include casinos under the coverage of the Anti-Money Laundering Act, the inclusion of which was signed into law (Republic Act No. 10927) in July this year.
Despite these developments, the gaming sector posted a P158.12-billion gross gaming revenues in 2016, 18.6% higher than the P133.28 billion in 2015, according to the Philippine Amusement and Gaming Corp.’s latest data.
Growth was likewise reflected in earnings of casino-resorts.
Melco Crown (Philippines) Resorts Corp., the operator of the City of Dreams Manila, reported a 63% jump in its net revenues driven by improved volumes across all gaming as well as its non-gaming segments. Bloomberry Resorts Corp., the owner and operator of Solaire Resort & Casino and Jeju Sun Hotel & Casino, reported a net profit of P2.32 billion last year, a reversal of the P3.38-billion net loss incurred in 2015, piggybacking on all-time high records in its gaming segments.
On the other hand, Travellers International Hotel Group, Inc., operator of Resorts World Manila saw earnings decline 15% during the period on account of lower revenues from its casino operations as well as increased financing costs due to the peso depreciation.
The health and social work subsector grew by 6.3% to P129.37 billion. Its growth, however, slowed from 9% in 2015.
The GVA of hotels and restaurants rose by 8.2%, the fastest growth among all subsectors, to P144.62 billion in 2016 from 6.9% logged in 2015.
Education — which comprised 40% of the sector’s total output — went up by 7.2% to P339.54 billion.
Output of other services activities grew by 6.8% to P42.68 billion, while that of sewage and refuse disposal sanitation and similar activities increased by 3.2% to P3.20 billion. — Mark T. Amoguis
