Resurgence of private construction seen next year

MANILA, Philippines — Private sector investments in the construction sector may return to pre-pandemic level by next year as inflation and interest rates ease, according to the National Economic and Development Authority (NEDA).

Speaking at the Build Better More Infrastructure Forum in New Clark City in Tarlac on Friday, NEDA Secretary Arsenio Balisacan said the country may see private construction go back to its pre-COVID level next year.

 “We’re not that too far,” he said.

He said construction has yet to return entirely to its pre-pandemic performance.

Of particular concern is private construction, which relative to public sector construction,  has declined since the beginning of 2020. 

“This lull is attributable to several factors. First, we expected some investor hesitation owing to initial policy uncertainty brought about by the elections in 2022,” Balisacan said.

Inflation slowed to 3.7 percent in June from 3.9 percent in May, snapping four months of acceleration, as utility and transport costs posted slower upticks.

Average inflation in the January to June period  was at 3.5 percent, within the two to four percent target of the Bangko Sentral ng Pilipinas (BSP).

At its last monetary policy meeting in June, the BSP maintained the benchmark interest rate at 6.50 percent, a 17-year high.

“Obviously, these investments are very interest sensitive so they are waiting for those interest rates to go down before they embark into a massive investment,” Balisacan said.

As inflation moves into the target range of two to four percent and global interest rates, particularly that of the United States, start to fall, he said interest rates in the country are also expected to decline.

“And that will improve the investment climate and hopefully with that, I think the investment appetite not just by our local firms but also foreigners to invest in the Philippines will significantly improve,” he said.

He said the economic team also recognizes the need to substantially improve the investment climate for the private sector.

Among the government’s strategies to improve the investment climate are enhancing physical and digital connectivity and leveraging public-private partnerships (PPPs).

Through PPPs, he said the government aims to address the challenges that affect the infrastructure sector, which many observers and analysts have cited as one of the most binding constraints to investment in the country. 

“By expanding and upgrading our infrastructure, we aim to create the enabling conditions for millions of Filipinos to generate high-quality jobs, raise the competitiveness of our local industries, diversify our growth drivers, strengthen economic resilience and enhance regional connectivity by linking our leading and lagging regions,” Baliscan also said.