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History Lessons - & impact on PH Property prices

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History Lesson

- The Asian Financial Crisis of 1997-98 and Events leading to it

(Based on Special sections in today's 30th Anniversary issue of Business World):

Prelude : How Reforms helped the PH transform into a tiger cub economy - BW, 24 July, S5

From 1992, new president Fidel V. Ramos addressed some historic problems:
+ Power Crisis: Dept of Energy created with licenses given to create IPP's & power stations
+ Infrastructure development: introduced Build-Operate-Transfer (BOT) for tollways, light rail, power plants, etc
+ Economic Reforms: 10% VAT tax introduced, and tax base was broadened
+ Liberalization of telecommunications, banking, civil aviation
+ Privatization: of Petron Corp, with 40% sold to Aramco for US$502 million
+ Bases conversion, such as 214-hectare project in BFC going to a consortium

Sidebar on

Makati PH property prices

These reforms, and rapid growth in other Southeast Asian Economies helped to trigger a property boom:


The Boom peaked in 1997-98 and then property prices collapsed by about 35%, back to where they were in 1995.

Real prices fell even more, from 1996 to 2003-4, by perhaps 50%

Asian financial crisis changes Philippines' trajectory - Business World, 24 July 2017

PH was said to be "one of the least effected" by the AF Crisis, but there was a shock in some areas (like property)
As the crisis began, PH seemed about ready to shake off its reputation as "the sick man in Asia"
During FVR years, it went "from a bleak landscape frequented by power outages, to a beehive of activity"
PH ended 1996 with a 6.8% growth rate (& soaring property prices), up from 5.7% in 1995.
For 1997, PH was targeting 7-8% growth, and govt economists were predicting a budget surplus.
Ramos was heralding that PH "had reached newly industrialized country status"

Drops often come fast after important peaks

Phil. Peso ... usPHP ... All Data : 2-years : 6-mos : 10-days /


+ Onset of the AF crisis began July 2, 1997, with Thailand floating the Baht, and seeing its value drop 18% in a day
+ Panic selling of the PHP followed with people concerned it would follow the path of THB
+ Overnight interest rates shot up from 15% to 20%, then to 24%, before peaking at 32%
+ Regulators floated the PHP currency on July 11, 1997 when it was P26.40. It ended the year at P 40.116


PSE-Index. / PH:PSEI ... All-data : 5-yr : 2-yr : 6-mo // All-Data-vs-PSE



+ The stock marlet had hit an all time high in Feb., at 3,447.60.
+ The low in 1997 was 1,722.01 (-50%), and that was a four year low. By year end, trading volume was cut by 30%
+ Interest rates went crazy, with overnight rates hitting as high as 170%, and the 91d Treasury rate averaged 11%
+ With hgher rates, consumer spending stalled. Car and parts manufacturers were podnering layoffs
+ Foreign companies called off their expansion plans in PH
+ Property related lending growth fell, from a truly overheated rise of 97.2% in 1996 to a rise of "just" 42.6% in 1997
+ Meantime, manufacturing-related loans grew at "only" 17.3%, down from 42.5% in 1996
+ The public sector deficit ballooned to P23 billion, instead of the P5.6 billon surplus that had been expected
+ Public sector borrowings shot up to, hitting P 35.3 billion by year-end 1997
+ Growth for 1997 was below original expectations, at 5.8%
+ FVR had to warn about worse problems in 1998, talking about "a loop of decline", while advising against panic
+ As 1998 began there were 431 notices of layoffs and almost 20,000 jobs were lost

The next administration faced a huge budget deficit and growing public debt levels

Estrada Administration
Joseph E Estrada declared he inherited a bankrupt economy, using some hyperbole, an also said:
"We are deeply convinced we are in a better position than some of the neighboring economies"
+ The currency crisis was declared over in May 1998, but not the economic crisis
+ Unemployment rose to 8.9% from 8.7% in the previosu year
+ THe Estrada administration lowered rates, and by year-end 1998, 91d treasury rates were down to 13.3%
+ For 1998 as a whole, the country barely eluded a full recession, posting GNP growth of just 0.1%,
+ But GDP growth was negative, at minus 0.5%, the first negative reading since 1991
+ The deficit for the year was P53 billion, and the country's debt stood at P1.5 trillion, up from P1.461 trillion
+ By January 1999, the IMF declared that the AFC was over
+ But the banking system remained lumbered with troubled loans: non-performing loans shot up from 5.8% (01/98) to 11% (11/98)


(Overall Comment) : it seems like Du30 has brought a period of reform and building like that of FVR's time as President.

The property boom we are seeing now, may be followed by a full or near-full retracement of the price gains.

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Is the Old pattern (of 1997) reoccurring?


DEFICIT Breaches Ceiling - Business Insight, front page, 25 July 2017


THE national government's fiscal deficit in the first half of the year exceeded the deficit cap for the six months period by P10.7 billion,

due to the under collection in tax revenues in the first semester.


+ Six months budget shortfall amounted to P154.5billion, which is 7% over the cap of P143.8 billion

+ "Underspending seems to be a thing of the past"

+ The BIR expects to make up the under-collection in Q3, thnx to a one-time item - "we are expecting P30 billion from Mighty"


+ Revenue collection was up 7% to P1.176 trillion, but fell below the target of 1.193 trillion by 1%



Finance secretary Carlos Dominiquez promised: "Fiscal prudence will continue to rule the day"

... in an attempt to dispel fears that the Duterte administration's ambitious spending would lead to fiscal instability


The govt plans to rely mostly on domestic borrrowings to fund its development plans, and

The Country's debt portfolio is now 67.1 percent peso-denominated.

This is a significant improvement from 58.1 percent peso demoninated in 2010

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Good Views on growth. Bad News on debt.


Fitch sees PH growth at 6.6% in 5 5yrs


DEBT watcher Fitch Ratings said Philippine economic growth in the next five years could average above 6.5% as the country continued to hold a strong external position and macroeconomic fundamentals

+ Fitch thinks GDP will likely grow by 6.6 percent on average in the next five years

+ In 2017 alone, Fitch projects 6.8 percent, and 6.7 percent in 2018

+ This comes with: current acct. surpluses, high levels of int'l reserves, & low and declining external debt

+ Modest deficits of 0.3 percent of GDP in 2017, and 0.7 percent in 2018

+ Infrastructure spending was expected to be P847 billion in 2017, 5.3 percent of GDP

"The PH remains a net external creditor, at 13.3 percent of GDP, and this is stronger than BBB peer countries"

Fitch affirmed a BBB- rating in March, with a positive outlook, but has some concerns about disruptions from the Drug war on the economy


Govt debt up 7.9% at P 6.41 Trillion in June

NATIONAL government debt rose to P6.41 trillion in June as the government issued more securities and the peso continued weaker against the dollar

+ Domestic borrowings accounted for P4.18 tr - 65% : + 9.3% year-on-year

+ Foreign creditors provided ---------- P2.23 tr - 35% : + 5.2%, with debt values figured at P50.44, rather than P47


PSEi breaches 8,000 to close at a 1-year high, up 0.83% on the day to 8,037,51

With the Property index up 1.68% to 3,855.28 on Wednesday, as AyalaLand hit a new high.

(From the Manila Times, pg. B1)

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WHY the Peso is Weak in a year when the USD is weak too


Phil. Peso ... usPHP ... All Data : 2-years : 6-mos : 10-days /



Hot Money net outflow hits $457M yr-to-date


Reverses yr-earlier new inflow of $773,77M


FOREIGN portfolio investments in the Philippines so far this year registered a net outflow of $457.83 million as of mid-July


BPI's Lead economist, Emilio Neri Jr., blames the PHP weakness on:

+ "External factors... particularly policy normalization", but

+ Admitted there were also domestic issues, such as the Marawi City conflict and martial law in Mindanao



The EURO was stronger than the USD - up 15.5% (to over Php59) from the April low ... EurPhp : vs.UsdPhp :sTlC5RE.gif


Buffer gone? Time to borrow in FX?

Vanishing current account buffer raises Peso risk - Business World, 7/28, front page,

THE OUTLOOK for the Philippines peso - Asia's worst-performing currency - just keeps getting grimmer.

+ May's current account deficit was the worst since the data began in 1980
+ PH is headed for its first annual CA deficit in 15 years
+ With the buffer disappearing, PH wll have to borrow FX to replenish it
+ The deficit is expected to be $600Mn in 2017, and $!.6 bllion in 2018
+ Macquarie Bank economist, Idris, sees the Peso falling to 52 by year end

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  • 8 months later...

PH aiming for Upper Mid-Income Status
May come 'Sooner than many think'

+ Target in the Philippines Development Plan is to reach Upper Mid-Income (UMI) status by 2022
+ Range for UMI is now $3,956 - $12,235, and includes: China, Malaysia, Russia, and Souh Africa, etc
+ Gross Per Capital Income for PH was $3,580 at end 2016, and could reach US$4,100 by 2019
+ PH Gross National Income (GNI) grew 6.5% in 2017, up from 4.1% in 2015
+ GNI growth is reach 5% in 2018 and 2019

However, there are some risks, and in 2016, Employment was below target
+ In 2016 there was a reported loss of 663,243 jobs (really?), well below the growth target of 1 million +/- 100k
+ Youth unemployment was 14.4%, well above the target of 11%. Implementing 12th year education had a big impact
+ Good news was that underemployment outside the NCR dropped from 19.7% in 2016, to 17.4% last year
+ The Nat'l govt is expecting that Build, Build, Build will generate about 1 million new jobs each year: 2018, & 2019
And they want to see Youth Unemployment drop to 10% or lower

(from the Headline news article, in today's BusinessWorld )

Another source

YEAR- GDP per Capita, USD
2012 : $ 2,591 : GROWth
2013 : $ 2,768 :
2014 : $ 2,842 :
2015 : $ 2,866 :
2016 : $ 2,927 :
2017 : $ 3,022E
2018 : $ 3,301E
2019 : $ 3,597E


> Statistica: https://www.statista.com/statistics/578713/gross-domestic-product-gdp-per-capita-in-philippines/

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  • 1 month later...

" Woah! 50% inflation! " 

I attended a Presentation by Rex Mendoza for Alveo after the MeetUp.  I will post the NOTES here


Rex spoke about Wealth Mgmt and how Philippines property has outperformed stock markets in the last year or two.

2022 still looked good for stocks until midyear.  Then a big drop and a bottom in place by late Sept.  Since that low, the PSEI is up 23 pct

2023 seems set to start with strong economic growth in Phl. But slowing Growth and slowing inflation globally.  Rex predicts 6.5 pct growth in phl in 2023.  China opening may help.  OFWs and BPOs should be a bright spot.  Meantime, the USA is pricing in a recession.  And Soaring mortgages are cratering USA Housing.  Along with some global slowing, Phl inflation may have peaked in dec 2022.

Phl oroperty buying demand will grow and supply too. But most of coming over-supply will be in Bay Area.  Banking sector remains healthy and supportive

Prices of 2 or 3 years ago cannot be recreated because of high price inflation in materials costs, and rising labor.  

He spoke of Alveo’s Tow Decade history and their high-end branding. Predicted that Arca, Circui, and other new locations may be on par with Makati but not above... With new ones coming... in Alabang, nuvali etc.  His Vision was backed by photos showing placemaking efforts, to make these new communities attractive.


( PRESENTATION SLIDE shows a Huge Rise in Prices -too bad this is so hard to see.  Forbes Park and Ayala Alabang prices.).                          

Mendoza showed long term charts showing huge appreciation of prices in Forbes Park and Ayala Alabang Village (AAV).  Over several decades there was average compounded growth of 17 to 18 percent per annum.  Families that bought lots at the original prices became wealthy through property price inflation.


Above Prices are from another SOURCE:  https://jpatagblog.wordpress.com/2019/10/09/quo-vadis-ayala-alabang-village-land-values/

( Note: Rex said there were some periods where annual inflation hit 50 PERCENT.  He does not expect that  to happen again.  But if it does come,  Property ownership provides a hedge.  Especially for those without big debts and high interest to pay. )

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