BMI View: The outlook for Philippines' construction sector remains positive, but the presidential election will weight on construction activity, which has led us to downgrade our forecast for the construction sector in 2016 - with growth now expected to be 7.5%.
Latest Updates And Structural Trends
Our outlook for Philippines' construction industry remains positive and we forecast real growth of 7.5% and 8.9% in 2016 and 2017 respectively. The presidential election poses downside risks to our outlook as it will result in project delays and could lead to a review or even cancellation of planned and ongoing development projects. The victory of Mar Roxas, Grace Poe and Miriam Defensor-Santiago would most likely bring continuity in terms of PPP projects, whereas that of Jejomar Binay and Rodrigo Duterte would bring change.
The approval by the House of Representatives of the Bill 6331, known as the PPP Act, which will institutionalise and strengthen the PPPs, bodes well for the long-term growth of the construction sector by providing greater investor protection and incentives.
The bid submission deadline for five regional airport projects and the Davao seaport project was rescheduled from March 28 to an unspecified date. The postponements pose downside risks to these projects as it is not clear whether they will remain a priority for the new administration.
We expect water infrastructure will outperform in 2016 and 2017, with the Philippines-based Maynilad Water Services' allocation of more than USD120mn to expand its wastewater treatment capacity and sewerage coverage in the country in 2016, illustrating the trend.
We believe the residential sector construction will be supported by strong structural growth fundamentals for housing a large and young growing population and rising middle income class, while continuous expansion of the tourism industry, coupled with efforts by the government to reinvigorate its gaming and leisure industry, will support the non-residential sector.
|e/f = BMI estimate/forecast. Source: Central Bank, National Statistical Coordination Board, BMI|
|Construction industry value, PHPbn||932.04||1,022.63||1,154.14||1,298.23||1,457.12||1,633.61|
|Construction Industry Value, Real Growth, % y-o-y||10.94||7.47||8.86||8.49||8.24||8.11|
|Construction Industry Value, % of GDP||6.9||7.0||7.1||7.3||7.4||7.6|
The Philippines scores 52 out of 100 in our latest Asia Pacific Infrastructure Risk/Reward Index, up from 51.7 in the previous quarter, which places the country 17th out of 21 countries in the region.
The country receives below average scores for Country Rewards and Industry Risks, which indicates multiple issues restricting the attractiveness of the Philippines' infrastructure industry relative to its regional peers.
Although there are a respectable number of companies operating in the country, a lack of transparency plagues the sector, impacting negatively on international and domestic tenders, and harming competitiveness. As a result, the Philippines scores just 35.0 out of 100 for Industry Risks, a score significantly lower than the regional average of 61.
|Risk/Reward Index||Rewards||Industry Rewards||Country Rewards||Risks||Industry Risks||Country Risks|
The Philippines Infrastructure Report features BMI Research's market assessment and forecasts covering public procurement and spending on all major infrastructure and construction projects, including transportation and logistics by land, sea and air; power plants and utilities, and commercial construction and property development. The report analyses the impact of regulatory changes and the macroeconomic outlook and features competitive intelligence on contractors and suppliers.
BMI's Philippines Infrastructure Report provides industry professionals and strategists, sector analysts, investors, trade associations and regulatory bodies with independent forecasts and competitive intelligence on the Philippine infrastructure and construction industry.
- Benchmark BMI's independent infrastructure industry forecasts for Philippines to test other views - a key input for successful budgetary and planning in the Philippine infrastructure market.
- Target business opportunities and risks in the Philippine infrastructure sector through our reviews of latest industry trends, regulatory changes and major deals, projects and investments in Philippines.
- Assess the activities, strategy and market position of your competitors, partners and clients via our Company Profiles (inc. SWOTs, KPIs and latest activity).
BMI Industry View
Summary of BMI’s key industry forecasts, views and trend analysis covering infrastructure and construction, regulatory changes, major investments and projects and significant national and multinational company developments. These are broken down into construction (social, commercial and residential), transport (roads, railways, ports, airports, etc), and energy & utilities (powerplants, pipelines and so on).
Industry SWOT Analysis
Analysis of the major strengths, weaknesses, opportunities and threats within the infrastructure and construction sectors and within the broader political, economic and business environment.
BMI Industry Forecasts
Historic data series (up to 2012) and forecasts to end-2024 for all key industry indicators, supported by explicit assumptions, plus analysis of key developments in the market and risks to the main forecasts. Indicators include:
Construction: Industry value (USDbn); contribution to GDP (%); total capital investment (USDbn); real growth (%).
Construction industry real growth forecasts (%) and industry value (USDbn) forecasts for industry sectors are split into Residential and Non-residential and Infrastructure sectors. Where the data is available for particular countries the infrastructure is further broken down into indicators for the transport subsectors of roads, railways, airports and ports and the energy and utilities sub-sectors of power plants and transmission grids, oil & gas pipelines and water infrastructure. This dataset is unique to the market.
The reports also include analysis of latest projects across the infrastructure sectors (transport, utilities, commercial construction).
BMI’s Infrastructure Risk Reward Index
BMI’s Risk Reward Index provides investors (construction companies, suppliers and partners) looking for opportunities in the region with a clear country-comparative assessment of a market’s risks and potential rewards. Each of the country markets are scored using a sophisticated model that includes more than 40 industry, economic and demographic data points. These provide indices of highest to lowest appeal to investors, with each position explained.
An assessment of the competitive landscape and key challenges to entering the market. Details of the largest companies active in the sector across the sub-segments of the industry, including the key financial figures from some of the largest players in the sector.
Examines the competitive positioning and short- to medium-term business strategies of key industry players. Strategy is examined within the context of BMI’s industry forecasts, our macroeconomic views and our understanding of the wider competitive landscape to generate company SWOT analyses. The latest financial and operating statistics and key company developments are also incorporated within the company profiles, enabling a full evaluation of recent company performance and future growth prospects.
The Infrastructure reports draw on an extensive network of primary sources, such as multilateral organisations, government departments, industry associations, chambers and company reports.
*Company profiles are not available for every country. Those reports instead contain information on the current activities of prominent companies operating in the market.