After a challenging few years, the Philippine economy is speeding up and taking off as the government expands on the country’s developing ambitions.
September 12, 2022
Malls, hotels, restaurants, and construction sites light up with renewed activity in the Makati Central Business District.
Prior to the emergence of Covid-19, the Philippines was already one of Asia’s fastest-growing economies. Now, with post-pandemic recovery well underway, and the tempering of global concerns ranging from fuel to supply chain issues, the outlook for the country’s economy is bright as it looks to regain its momentum and rise to even greater heights.
Positive developments have followed the relaxation of Covid-19 restrictions, thanks to an expanded vaccination program and adherence to health precautions. This has led to a rebound in investments and household consumption.
“Strong retail growth is a bright spot in the Philippines and in the region,” says Frederic C. DyBuncio, President and CEO of SM Investments Corporation. “Despite rising inflation, SM Retail reported its revenues rising by 18% in the first half of 2022.”
The pandemic has also spurred the adoption of digital and online transactions in the country, leading to a fintech boom. “Digital innovations have made doing business in the Philippines easier, creating a springboard for economic recovery,” explains Nestor V. Tan, President and CEO of BDO Unibank, the Philippines’ largest bank.
Speaking on the property sector, Vista Land & Lifescapes President and CEO Manuel Paolo A. Villar Jr. shared in their H1 2022 earnings report about how the company saw their income grow by 11% from last year, and will continue to upgrade and develop digital initiatives. Having recently launched VistaREIT, their company’s commercial real estate investment trust, Villar remains optimistic about the prospects of a reinvigorated economy.
Official figures show the Philippines’ GDP posted 8.3% growth in the first quarter of 2022, slowing to 7.4% in Q2 due to inflationary pressures. The government expects full-year growth to be between 6.5-7.5%, still among the highest in the region.
With growth accelerating and financial burdens easing, the new administration is confident about the country achieving upper-middle-income status within the next six years.
In its first few months, the Marcos government has highlighted its continued focus on fiscal management and reviving the underutilized agricultural sector. The current team has stated its commitment to not just sustain, but to also expand the previous administration’s ambitious Build Build Build program, keeping infrastructure spending at 5-6% of GDP. By targeting other promising sectors, such as technology, healthcare and education, the goal is to raise the country’s attractiveness as an investment destination.
The latest official statistics show all economic sectors expanding, with growth mostly driven by the services and industry sectors at 9.1% and 6.3%, respectively. Business process outsourcing remained buoyant even during the pandemic and is expected to continue to play a significant role. However, tourism is the sector predicted to rebound most dramatically over the next two years.
Having weathered great storms, both literal and figurative, the Philippines is showing that, with a bit of wind at its back, its economy is ready to again fly forward and upward.
SM: A Beacon Of Philippine Recovery
As restrictions ease, shoppers are returning to SM stores and malls in droves, a bright spot in the company’s consumer-driven growth.
Consumers in the Philippines have been enthusiastically returning to SM malls and retail stores as strict community restrictions loosen. SM Investments Corporation (SM), which holds interests in leading retail, banking and property businesses in the country, has been a leading beneficiary of this robust retail spending. SM’s consolidated net income rose by 27% to PHP25.5 billion (US$464.1 million) while consolidated revenues rose by 23% to PHP238.5 billion (US$4.34 billion) in the first six months of 2022.
Frederic C. DyBuncio, President and Chief Executive Officer of SM, says this was true for all retail categories thanks to the return of crowds to SM malls. “Despite rising inflation, this strong retail growth is a bright spot in the Philippines and in the region,” says DyBuncio.
The Brightest Spot
As consumers return to shopping safely in SM stores, buoying retail growth, SM’s efficient retail operations and continued strategic expansion are providing the necessary support. SM Retail, which operates more than 3,300 department stores, grocery stores and specialty retail outlets, reported that its revenues had risen by 18% to PHP163.7 billion (US$3.1 billion) in the first half of 2022, led by increased foot traffic in stores and malls. SM’s retail net income grew 91% to PHP7 billion (US$133.8 million), also reaping the benefits of cost reductions and efficiencies across all retail formats.
There was renewed vigor in shopping activity, especially for fashion-related items in the department stores. All around, kids needed new clothes due to sudden growth spurts, while people emerged from community lockdowns badly needing wardrobe upgrades to go back to working in offices once the restrictions were eased. With the resumption of face-to-face schooling, there was also a pick-up in demand for school essentials, from shoes and bags to stationery supplies.
SM’s larger grocery formats also benefitted from higher foot traffic in SM malls. While grocery stores provided the usual essentials, SM’s wide assortment of outlets catered to all market segments as the momentum for spending increased.
Rediscovering the Joy of Shopping
As crowds returned to SM malls, foot traffic increased by more than 100% over pre-pandemic levels for the year-to-date. Crowds rediscovered the joy of shopping, savoring a wide variety of choices in wide and comfortable spaces that echoed SM’s brand promise of “We’ve Got It All for You!”
To give shoppers added peace of mind, thermal checks are positioned at entry points at SM stores, while masks are worn by all staff and constant disinfection and sanitation are practiced, including UV sterilizers in escalators.
In collaboration with its tenant partners, SM Supermalls has also introduced new and safer dining experiences using touch-free, cashless payment services. Reintroducing the “fun” element into shopping, SM Supermalls has transformed its event centers, atriums and open-air parks into designated dining areas where customers can order from their favorite restaurants and dine in cathedral-height spaces safely and distanced from the crowds.
SM malls, which now total 79 across the country, also play a role as social centers in the Philippines by transforming to provide Filipinos with a unique shopping experience. These include paw parks for those with pets, al fresco dining areas for groups to hang out, plant hubs for eco-enthusiasts, bike facilities for the growing cycling community, co-working spaces, experiential retail, and larger-than-life cinema experiences, among others.
Sustainable Shopping Through SM Green Finds
To cater to evolving customer demand, SM Retail is also making shopping for sustainable products more accessible and easier for customers with SM Green Finds at The SM Store.
SM offers various green finds through its home, fashion, and beauty departments, including kitchenware made from high-quality bamboo, tableware made from acacia wood, fashion pieces crafted from recycled materials, and clean beauty products that are free from harmful chemicals. Its retail affiliates also offer eco-friendly options, which are either made from natural ingredients or produced by social enterprises. Kultura, for example, showcases handcrafted products made by artisans and social enterprises that use locally sourced materials such as abaca, bamboo and rattan.
SM Green Finds is part of the SM Green Movement, which aims to improve the quality of life of communities through sustainable solutions to promote a green planet, green living and a green culture.
With all this activity around its retail outlets and malls, SM is forging ahead strongly with its own journey of expansion, evolution and growth. “Our continued growth and evolution are testaments to the fundamental relevance of our businesses to Filipino consumers,” says DyBuncio. “This confidence from them continues to motivate us to innovate and serve them better.”
BDO, the Philippines’ largest bank, continues to forge ahead with its digital transformation agenda and designs solutions to meet the needs of Philippine customers and international businesses.The pandemic has had a profound impact on lives and businesses everywhere, transforming the world hugely in a short space of time. In the Philippines, people have had to contend with one of the globe’s longest lockdowns, with economic activity practically immobilized. Businesses were shuttered, families were confined at home, and streets became silent.
But not everyone went dark. One bank in particular was determined to continue to facilitate economic activity and provide services to consumers and businesses. BDO Unibank (BDO), the Philippines’ largest bank, ramped up digital innovation during the pandemic so that customers could continue to transact electronically, anytime and anywhere.
“Banking is critical to the flow of goods and services. During lockdown, people still needed to pay for essentials like food, medicines and healthcare. Businesses needed to move money to fund their operations. At BDO, we were determined to find ways to continue to serve our customers, rolling out innovative digital solutions to ensure continuity of service,” says Teresita T. Sy, the bank’s Chairperson.
Today, as the Philippines navigates the post-pandemic recovery period, BDO is continuing to forge ahead with its digital transformation agenda, designing solutions to meet the unique needs of Philippine customers while providing borderless services to international businesses.
Driving Digital Adoption Today
Driving digital adoption in the Philippines is not easy. Due to underlying demographic limitations and long-held ways of working, Philippine consumers and businesses embrace new technology at different rates. For example, while adoption of digital channels grew during the pandemic, a significant number of customers still prefer the familiarity of transacting in-branch.
“There is a view that branch banking is very traditional, even old-fashioned. But thousands of Filipino consumers and businesses still prefer in-branch transactions. So, we needed to bring the benefits of digitization to our branches. We wanted to make branch banking as innovative, safe, secure and efficient as possible, ” explains Nestor V. Tan, BDO’s President and CEO.
BDO therefore created a hybrid branch model that fuses technological innovation with the warmth of human interaction, enhancing the branch experience. To complement personal engagement, BDO rolled out a convenient online appointment booking platform, allowing bankers to better anticipate and manage incoming transactions and significantly reduce customer waiting time. For day-to-day banking needs, BDO rapidly installed automated kiosks that enable efficient queuing and straight-through-processing, thus eliminating paper handling. This created opportunities for customers to engage BDO bankers on more value-added services.
Technology is also enabling the bank to extend service hours and accessibility through their BDO Universal Machines—state-of-the-art ATMs that allow 24/7 self-service for a wide range of essential transactions beyond just dispensing cash. The ATMs use biometrics, facial recognition and fingerprint scan technology, eliminating the need for physical cards while making transactions easier and safer.
An End-to-End Digital Experience
While these innovations allowed BDO to keep most of their branches open during the pandemic, their investments in technology platforms and solutions, coupled with a mobile-first approach to customer experience, allowed the bank to operate 24/7, unshackled by the constraints of a physical branch network.
For digital-savvy customers who prefer a fully remote experience, BDO’s Online Account Opening portal allows online submission of account opening documentation, while Know-Your-Customer interviews are conveniently conducted via video conference.
BDO also made issuing payments using a mobile device easy and convenient with BDO Pay, the bank’s electronic wallet. BDO Pay gives customers access to all their bank and credit card accounts in one mobile app, enabling purchases or transfers using QR codes, bills payments, and peer-to-peer funds transfers. And because BDO Pay is linked to customers’ BDO accounts, funding is automatically available, with no need to deal in physical cash. Customers can take cash out from their e-wallets at any time for free at any of the bank’s ATMs.
BDO’s API technology also seamlessly connects with the largest global money service bureaus and remitters, with 24/7 direct account crediting for account holders, immediate cash pick-up in any of their branches nationwide, or even cash delivery to beneficiaries across the country.
Digitizing Financial Supply Chains
BDO’s innovations have made doing business in the Philippines easier for institutional clients as well. During the pandemic, corporates relied on the continued operation of BDO’s branch network to reach their own customers and suppliers. In a country that is still highly reliant on physical cash, businesses needed a banking partner that could provide certainty and continuity of business.
“Many Filipinos still deal in paper pesos, not pixel pesos, so businesses still need us to be able to provide physical cash and check services. Hence, we are applying automation to make physical supply chains as digitized as possible, to improve efficiency, and reduce cost and risk for our clients,” says Tan.
Corporates have also been looking to BDO to help them migrate from physical to digital transactions for better visibility and control of their cash positions. Real-time information provided by digital transactions speed up collection identification and reconciliation, while payment automation helps corporates meet their own obligations optimally.
A Springboard for Recovery
The digital transformations rolled out by forward-thinking banks like BDO have found their way into mainstream business-as-usual during this post-pandemic era, generating an appetite for further innovation and creating a springboard for economic recovery. As Sy sums up, “BDO is committed to continuing to lead through technological innovation, providing practical solutions for consumers and businesses that support economic activity at all levels of society.”