PH e-commerce gains during COVID-19 lockdown
According to a report released by Maybank, the quarantine implemented across various countries increased online consumer activity as the mobility of people was reduced. The report entitled “Consumer Behavior During a Pandemic” mentioned that data from Google’s COVID-19 Community Mobility reports showed that usage of retail and recreational establishments dropped by 82% in the Philippines from February 29 to April 11, 2020. Philippines and Malaysia also reported the steepest decline in the movement of people. Due to the mobility limitations caused by the pandemic, Maybank believes that e-commerce penetration will likely rise. Data from Euromonitor also showed that online sales account for only 4% in the Philippines and Indonesia, significantly lower than the 30% of South Korea.
We believe that the pandemic and lockdown may likely cause a shift in consumer habits as people are more likely to opt for online shopping to avoid the risk of infection. We recommend that retailers expand their offline-to-online strategies to capture the demand. Retailers under the essential business sector, such as food and beverage, may also look into the feasibility of partnering with on-demand delivery service platforms to reach more customers. The projected drop in overseas Filipino workers (OFW) remittances and rise in unemployment for the remainder of 2020 are likely to erode consumer confidence and affect retail demand.
Q1 PEZA-approved investments fall
The Philippine Economic zone Authority (PEZA) has reported close to a 30% decline in approved investments in Q1 2020 due to the impact of the COVID-19 pandemic. Even before the enhanced community quarantine (ECQ) in Luzon was implemented, approved investments already dropped by 5.85% in the first two months of 2020. PEZA projects also dropped to 87 from 128 in the same period of 2019. Meanwhile, investments in the information technology (IT) sector dropped by 42% to PHP2.3 billion in Q1 2019 from PHP4.0 billion in Q1 2019. These figures are also contrary to PEZA’s initial projection of a 5-10% growth for 2020.
The effects of the COVID-19 and the lingering concerns on the proposed Corporate Income Tax and Incentives Rationalization Act (CITIRA) are likely to compel locators to take a wait-and-see stance. These concerns are likely to affect office and industrial space take-up across the country for the remainder of 2020. Colliers has been seeing less inspection deals and office space queries while CITIRA concerns have resulted in slower foreign investment inflows into the country. Lower manufacturing investments should result in dampened absorption of industrial space and warehouses. Economic analysts and credit rating firms are projecting a recovery in 2021 and this should help revive demand for office space and industrial parks.
World Bank sees 19.7% drop in remittances
A report from World Bank noted that remittances from low and middle-income countries are expected to decline by 19.7% this year as most migrant workers face layoffs and reduction in wages. In absolute terms, remittances are projected to drop to USD445 billion this year from the USD554 billion recorded in 2019. The World Bank also noted that total remittances from the Philippines were the second largest in the Asia Pacific region in 2019, next only to China.