German firms maintain dim outlook on Philippine economy

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Economic managers expect gross domestic product to grow by 6.5-7.5% this year, although this is likely to be revised due to the reimposition of lockdown measures starting late March. — Photo by Michael Varcas, The Philippine Star

More than 40% of surveyed German firms in the Philippines will have little to no changes in local investments over the next year as they continued to have a dim outlook on the economy’s recovery, the German-Philippine Chamber of Commerce and Industry (GPCCI) said.

The chamber collected responses from 66 firms spanning manufacturing, construction, trade, and services industries from March to April, as the capital region and nearby provinces were placed under a stricter lockdown due to the spike in coronavirus disease 2019 (COVID-19) cases.

Based on the survey results, 42% expect almost no changes in local investments, while 14% expect higher investments. Around 29% expect lower investments while 15% will have none at all.

“Companies feel the negative economic effects of the COVID-19 surge in Q1 2021, and they are unsure about the economic development,” GPCCI President Stefan Schmitz said.

“Only one out of ten companies expects economic recovery this year. Six months ago, the number was 3 times higher.”

Instead, almost half believe that recovery will happen in 2022 while 41% said it would take even longer.

The Philippine economy shrank by 4.2% in the first quarter, the fifth consecutive quarter of decline since the pandemic started. Economic managers expect gross domestic product to grow by 6.5-7.5% this year, although this is likely to be revised due to the reimposition of lockdown measures starting late March.

“Business development expectations for the next 12 months appear to stagnate, and fewer companies envision a positive development from the Fall 2020 survey,” the chamber said.

More than three-fifths of firms surveyed said that business development in the next twelve months will remain the same, while 29% predict better business developments. This is a decline from the 47% that expected improved business development in the October poll.

Half believe that their company performance is satisfactory, while 29% said the situation is bad.

Top economic risks named by the companies included low demand, economic policy risks, and financing issues.

“Problems related to supply chain and logistics (48%) have seen an increase by 5% from the Fall 2020 survey,” the chamber said.

“For the 29 companies that have indicated problems related to supply chain and logistics: 48 % said that they are adding new suppliers for their products, 28% said that their supply chain will still the same, and 24% have equally voted on distributing suppliers in several countries/regions and increase in stockkeeping.”

While around 56% said that local employment in the next twelve months would be around the same, 29% expect job cuts and 15% project growth.

To compare, 27% of those surveyed in October expected employment growth while 35% projected a decline. — Jenina P. Ibanez

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