The groundswell of watchful optimism persists in 2024, and one of the country’s leading conglomerates maintains that there is still room for growth.
SM Investments Corporation says the Philippines has been consistently positive in terms of consumer growth.
“If you look back at the historical performance of the Philippine economy, even during the height of the Asian crisis, household consumption in the Philippines has been quite resilient, primarily driving sustained economic growth,” SM Investments President and Chief Executive Officer Frederic C. DyBuncio said.
Discretionary spending in key categories such as fashion, food and beverage as well as entertainment, among others, is buoying consumption activity.
Caption: Buoyant consumer activity is seen in sustained spending in discretionary retail categories such as fashion.
As of the first nine months of 2023, retail net income grew by 19%, driven by growth in Non-Food discretionary categories sales, both in SM Store and Specialty Stores.
“Overall, we are positive about our retail business, and we continue to be mindful of our customers’ needs as we offer choices that can match the size of their wallets,” Mr. DyBuncio said.
Substantial remittances from Overseas Filipino Workers (OFWs) are also supporting growth. Latest data from the Bangko Sentral ng Pilipinas indicated that personal remittances from OFWs increased 3.1% in October 2023 to US$3.33 billion from US$3.23 billion in the same month last year. This resulted in total personal remittances rising by 2.9% to US$30.57 billion in the first ten months of 2023.
“The continued growth of OFW remittances supports the consumption story of the Philippines,” he said.
Adding fuel to consumption growth is BPO expansion and improving unemployment numbers that are dropping to new lows.
The Philippine Statistics Authority reported that the country’s unemployment rate in November was estimated at 3.6%, lower than the unemployment rates in November 2022 and October 2023 which were both at 4.2%.
In terms of BPO expansion, many BPO firms have been moving to the provincial areas such as in Cebu, Davao, Iloilo, providing additional spending power to a young population, Mr. DyBuncio added.
Serving underpenetrated sectors
SM’s expansion is also advancing, largely in provincial areas which present opportunities for establishing modern retail formats in a significantly underpenetrated sector.
Seeing this, over 80% of SM’s new retail stores are located outside of Metro Manila. Mall expansion is also geared towards the provinces such as most of Northern Luzon, Visayas and the progressive cities in Mindanao.
SM City Sto. Tomas is SM’s 85th mall and fourth in the province of Batangas.
In terms of housing, this sector also presents a huge opportunity given the current 6.5 million housing backlog. SM Development Corporation (SMDC), SM’s residential arm, has a growing presence in the provinces with 18 residential developments in key provincial cities as of September 2023. These projects are strategically alongside or near SM’s malls and transportation terminals.
In banking, approximately 53% of the adult population or about 41 million are unbanked as of 2021 which offers a huge market for increased financial inclusion. BDO Unibank and its community banking arm BDO Network Bank continue to provide relevant financial solutions to address unique banking needs in the provinces.
For communities in remote areas without traditional bank branches, BDO Cash Agad allows convenient access to funds for daily expenses, emergencies, or business needs. This makes use of partner agents such as sari-sari stores, gasoline stations, water refilling stations, and mini-groceries for customers to do cash withdrawals, bills payment, and other basic banking transactions through a point-of-sale (POS) terminal which facilitates payments.
SM has also invested in high growth sectors such as in logistics through 2GO, the largest transportation and logistics provider in the country and Airspeed, an end-to-end logistics solutions and express courier company which are both well positioned to meet various economic needs.
In the race to clean energy, SM is invested in renewable energy supply through wholly owned geothermal firm Philippine Geothermal Production Company in support of the country’s growing advocacy for green energy and sustainable development. PGPC is targeting to increase its steam production by approximately another 300 Megawatts of baseload renewable energy through its new exploration projects.
With these additional investments supporting SM’s core businesses in retail, banking and property, SM is viewed by investors as a proxy to Philippine growth.
“Investors view us as a proxy because all of SM’s businesses touch the daily lives of millions of Filipinos. One thing we wish to highlight is that despite the size of our company, investors, especially foreign investors, still view us as a growth company and there is still plenty of room for growth moving forward,” Mr. DyBuncio said.
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