Published on December 20, 2013,

Written by Bernardo M. Villegas

A few analysts have been expressing doubts about the sustainability of the ongoing high growth of the Philippine economy. Taking a page from what happened in Thailand in 1997 or in China in the last two years, these doubting Thomases are spreading the “bubble” talk. They say there could be a bubble in OFW (overseas Filipino workers) remittances; or in the business process outsourcing sector; or in real estate. Let me treat each one of these present engines of growth.
Can there be a sudden decline in the more than $20-billion annual remittances from OFWs? I actually estimate that the total remittances are closer to $25 billion—that is, if we add to the official receipts the amounts sent through informal channels or carried personally by OFWs when they come home to visit. Ever since 2007 when I was residing in Barcelona, Spain, I have been monitoring very closely these remittances, especially after some international agencies actually warned about precipitous declines because of the beginning of the Great Recession. As anyone can verify, however, for the last six years, through all the financial, economic and political crises, remittances from our OFWs continued to increase at a constant rate of 5 to 6 percent. Even the slow recovery of the US economy will hardly make a dent on these dollar flows into the Philippines. Most of the dollars that come from the United States are actually incomes earned in the Middle East or elsewhere, except that they are channeled through US banks. Most of the more than three million Filipinos in the United States are already either US citizens or green card holders, and they send very little money to their relatives in the Philippines.
What about the BPO/KPO (knowledge process outsourcing) industry? Can there be a sudden large decline in its foreign exchange earnings? In a recent briefing held at the University of Asia and the Pacific, David Leechiu, country head of Jones Lang LaSalle Philippines, the leading real estate services firm in the country, presented hard data showing that there is absolutely no danger of an oversupply in the office market because of the continuing increase in new BPO and KPO companies locating in the Philippines—including investors from our major competitor in this industry, which is India. In fact, in addition to the burgeoning offshoring and outsourcing firms, there will be other demand drivers such as financial services, insurance companies and consulting firms that can create an additional demand of anywhere from 20,000 sq m to as much as 100,000 sq m of office space from non-BPO or traditional offices. These office buildings are also being constructed in such cities as Cebu, Davao and Cagayan de Oro. There is no bubble here.
What about the residential market? Leechiu presented two segments: the high-end market with a selling price of P10 million and above, and the mid-range market, from P1.5 million to P10 million. There is very little danger of a bubble in the mid-range market because the buyers or their relatives usually are the ones occupying the units. Besides, there is an increasing number of investors from Singapore, Hong Kong, and other neighboring countries who purchase these mid-range units to rent for investments purposes.

The outlook presented about the retailers market can be summarized as follows: Demand is forecast to remain healthy as international and local retailers are expected to continue their expansion. The large incoming supply may slightly push vacancy in the next 12 months. Upcoming supply in Metro Manila is approximately 700,000 sq m and is dominated by the major players. Several upcoming retail spaces are refurbishments and expansions of existing malls. Rents are projected to grow steadily in the next 12 months buoyed up by the stable retail demand and healthy domestic recovery fueled by robust consumption spending.
Add to all these considerations the very prudent policies of the Bangko Sentral ng Pilipinas in limiting real estate credit in bank-lending portfolios, the possibility of a bubble becomes very remote. Not only will there be no bubble in the OFW, BPO and real estate sectors. Other engines of growth will actually intensify in 2014: infrastructure spending of the government; thousands of hotel rooms being built in the National Capital Region; the implementation of long-delayed
Public-Private Partnership projects; and the billions of pesos from local and foreign sources that will be spent on the rehabilitation and reconstruction of the communities ravaged by Supertyphoon “Yolanda.” Gross domestic product can possibly grow at 8 percent in 2014.
Bernardo M. Villegas ( is senior vice president of the University of Asia and the Pacific.

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