Philippine investments ahead of neighbours

By BLOOMBERG

MANILA • Capital investment in the Philippines is surging past the rest of South-East Asia (SEA) as the government and firms ramp up spending.

In the first nine months of this year, net physical assets in the Philippines grew 10.4% from a year earlier. That compared to a 6.9% increase in Malaysia and 5.8% gain in Indonesia, according to data from statistics offices.

There’s reason to remain bullish on the outlook. Philippine government spending jumped 28% in October, the largest rise in almost a year, with another record budget planned for 2018. Companies are also joining in: Metro Pacific Investments Corp plans to invest as much as US$16 billion (RM65.44 billion) through 2022 on road, water and power projects, while Ayala Land Inc is boosting capital spending to a record US$2 billion next year.

President Rodrigo Duterte is building a network of railroads and highways across the archipelago in an ambitious US$180 billion infrastructure programme. Investment firing up adds another engine to the economy, headed for a sixth year of growth exceeding 6% and among the world’s best performers.

“The government is very committed to keep spending strong and that has maintained the robust momentum of the investment cycle,” said Eugenia Victorino, an economist at Australia & New Zealand Banking Group Ltd in Singapore. “With growth firing on all cylinders, the Philippines is really standing out in a region where the outlook has turned more positive.”

After lagging its neighbours for decades, the Philippines is catching up. Growth in net physical assets — or gross fixed capital formation — averaged 14.4% in the five years through 2016, the fastest in SEA and almost twice as fast as Malaysia, according to the World Bank.

Duterte wants to transform the Philippines into an uppermiddle income country by the end of his term in 2022, and the cornerstone of his vision is a plan referred to as “Build, Build, Build”. It includes the capital’s first subway and a 653km railway to the south.

“Capital formation goes hand in hand with the focus on infrastructure,” said Jonathan Ravelas, chief market strategist at BDO Unibank Inc.

“The private sector has always been investing, but now public spending is catching up.”