BPI Urges Clients to Enter Industry Winners

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Citing vulnerability to pandemics and business shutdowns involving high-touch services, the Bank of the Philippines (BPI) senior economist encourages business owners to get into manufacturing and explore the possibility of bring their businesses to the regions.

BPI’s Chief Economist, Emilio “Jun” Neri, advised corporate clients to explore opportunities outside of high-contact businesses and outside of Metro Manila, in his presentation titled “Prospects for Recovery Facing Headwinds: The Economy in the Next 18 Months,” during the recent BizTalk Online by BPI Business Banking.

“It really is time to rethink that our business models may not be working as well as they used to. We can maybe look at manufacturing as a possible prospect,” Neri said.

He explained that one of the reasons why the Philippines underperformed during the pandemic was that the country’s share of manufacturing output in gross domestic product (GDP) at 17.2% continued to lag behind the GDP ratios were highest in the region: Malaysia (63.9%) and Thailand (61.7%).

Neri also explained that ASEAN neighbors have done better than the Philippines during the pandemic because they have bigger manufacturing sectors. “Manufacturing tends to do well even with tight and strict health protocols, unlike services,” he said, referring to high-touch businesses that include restaurants, hotels and other focused businesses. on services.

While the country has remained at Alert Level 1 since the start of the year, manufacturing output in the first quarter of 2022 returned to 2019 levels, driven by food products, pharmaceuticals and base metals and products computers and electronics.

According to Neri, the basic pharmaceutical sector has great potential, thanks to production 30% higher than its pre-pandemic levels. “We can explore this business. I think it has great potential,” he shared with BPI’s corporate clients.

“We are a service economy, which is why high-touch activities were affected when the pandemic happened. If monkeypox cases increase and become like COVID-19, we will be caught off guard again and our businesses will suffer significantly,” Neri added.


MSME sector

Citing data from the Philippine Statistics Authority (PSA) and the Department of Trade and Industry (DTI), Neri said that 47% of micro, small and medium enterprises (MSMEs) are engaged in wholesale and retail and repair of motor vehicles and motorcycles. He added that Vietnam or Indonesia, which have been more resilient during the pandemic, would have a smaller wholesale and retail sector in the MSME space.

While more than 300,000 establishments closed in 2021, more than 100,000 new businesses opened over the same period. However, Neri said many of them are still located in metropolitan areas. While this is natural since demand here is high, he advised companies that if they want more sustainable development, they might consider doing business outside of Metro Manila.

In terms of Gross Regional Domestic Product (GDP), Neri added, some provinces are already above pre-pandemic levels, especially those in the south.

Dominique Ocliasa, Head of BPI Business Banking, for his part told his professional clients: “It is more important than ever to prepare and position our businesses to become more agile, resilient and well positioned for continued and sustainable growth”.

“We at BPI Business Banking understand that we need to deliver relevant business solutions that meet your changing needs so that we can continue to support SMEs as you navigate these unprecedented challenges,” added Ocliasa.

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