The Market Monitor Minding the Nation's Business
By Jinky Jorgio
Due to transport infrastructure by the government, particularly the rail and road developments, the Philippines’ construction sector will rebound strongly this year according to Fitch Solutions Country Risk & Industry Research.
In its report, the Fitch unit noted an increase in construction activities and infra expenditures over the past months.
The same report noted that the Philippine construction sector grew by 25.7 percent year-on-year in real terms in the second quarter, one of the fastest growth rates in the country’s history.
“This is despite localized lockdowns across the market in recent months. We do stress that this is in large part due to low base effects from the second quarter 2020 when the pandemic first hit but signals a very strong recovery in the market in line with our initial expectation,” the report reads.
Fitch said the construction industry is expected to grow by 24.2 percent this year and 16.1 percent next year after slumping by 26 percent last year due to the impact of the pandemic.
The research arm of the Fitch Group expects weaker gross domestic product (GDP) growth in the second half of the year due the containment measures amid increasing downside risks due renewed resurgence of COVID-19 infections.
Further, the report noted, “We have to factor this development into our forecasts as many projects have continued to register strong progress at the time of writing, but the situation remains highly fluid and we may revise our forecasts downwards if necessary over the coming weeks”.
Last month, Fitch Solutions slashed its projected GDP growth for the Philippines to 4.2 percent instead of 5.3 percent this year as the country continues to struggle to contain outbreaks and speed up the pace of COVID-19 vaccinations.
Fitch Solutions noted that infrastructure remains the core of the Philippine government’s plans to revive the economy and would support its near-term growth outlook.
“We expect transport infrastructure, particularly rail and road development, to be the key driver of infrastructure and construction growth in the Philippines over the coming years. This will be supported by a robust pipeline of projects across all transport subsectors, which has continued to expand rapidly,” it explained.
Under this year’s national budget, the Department of Public Works and Highways received the highest budget allocation increase to P695.7 billion, while the Department of Transportation got P87.9 billion.
Last 2022, the government allocated P1.18 trillion for its massive infrastructure buildup under the Build Build Build program, a key policy driving investments in the construction sector.
The government has identified 112 projects under the program and committed to boosting the growth of the construction sector as the country’s economic growth is seen averaging six percent annually through 2030.