German companies upbeat on PH economy – survey

Published June 29, 2022, 5:52 PM

by Bernie Cahiles-Magkilat

Majority of German businesses in the Philippines foresee positive outlook in the next 12 months, but also expect significant impact of the Russian invasion of Ukraine on the local economy, according to the latest result of the AHK World Business Outlook (AHK WBO) survey.

The Spring 2022 AHK WBO is a regular survey among member companies of the German Chambers of Commerce abroad, delegations, and representative offices (AHK). It encompasses the feedback from more than 4,200 German companies, branches, and subsidiaries worldwide. The AHK WBO Survey initiated by the German Philippines Chamber of Commerce and Industry (GPCCI) was participated in by 87 companies related to the German – Philippine relations.

“A positive business outlook is evident for Spring 2022,” the survey said as it illustrates that 47 percent of respondents are in a better business situation and 43 percent remain at a satisfactory level.

Survey results also showed significant decrease in companies that consider themselves in a bad situation since Spring 2020 at 36 percent.

More than half (55%) of the respondents are expecting a better business outlook in the next twelve months. The survey also showed that 51 percent of the respondents expect that the local economic development of the country will remain stagnant for the next twelve months.

Also, 41 percent of the respondents are expecting local economic improvements in the next twelve months.

In terms of investments, the survey also depicted a positive investment outlook with 44 percent of respondents anticipate investment developments in the next twelve months, a notable increase from 13 percent two years ago.

In terms of employment, 48 percent of respondents said they will retain the same number of employees in their workforce. Notably, 46 percent of the respondents consider hiring more in the next twelve months – which is considerably higher than the previous four surveys.

“The improving situation of the pandemic in the Philippines is evident with the low case reports and relaxed business restrictions, this is felt by the German business community in the country,” says GPCCI Executive Director Christopher Zimmer. We also have observed an uptick in investment interest which shows the optimism of companies involved in German-Philippine business relations.

However, German businesses said that oil prices pose the biggest risk for a company’s economic development.

The latest Spring 2022 survey showed that 49 percent of respondents consider the price of energy to be the biggest risk for companies. The second biggest risk at 45 percent is the price of raw materials followed by 41 percent on foreign exchange rate concerns.

Most of the respondents (78%) see higher costs for energy, raw materials, and intermediate goods as the short-term consequences of the Russian invasion of Ukraine. Further, disruptions of logistics and supply chain are also seen by 61% of companies choosing it as the second short-term consequence.

This crisis further changed companies’ long-term strategies in the international division of labor. It also showed that 42 percent of respondents of the survey see that legislations and trade barriers will increase political influence on supply chains, while 41 percent also expect changes in the risk assessment of locations.

“Most businesses are reeling from the impact of the Russian – Ukraine war since many European countries are heavily dependent on Russian energy imports. The sanctions that have been imposed because of the outcomes of the war have resulted in significant energy price increases and supply chain disruptions globally,” said GPCCI President Stefan Schmitz. “We look forward to working with the incoming administration to address these issues and to partner in fostering economic growth in the country.

German businesses see the quality of education, and availability of qualified workers as location factors for business activity and trade & investment

The survey also featured a question regarding the location factors for their respective business activity. Quality of education in technical fields (57%) and transportation and logistics (55%) are the top two factors. While, the level of perception of corruption, legal predictability and certainty, and political stability were tied at 54 percent.

Regarding the location factors for trade and investment, 68 percent of the participants see the positive impact of the availability of qualified workers in the technical field. Majority or 61 percent see the quality of education in the technical field as a major factor for trade and investment. Transportation and logistics are considered by 59% to be trade and investment location factors.

Of the 87 Philippines-German firms that participated in the survey, 31 percent are from the manufacturing industry and construction, 18 percent from trade, and 50 percent from services. Majority (52 percent) of the respondents surveyed have less than 100 employees, 21 percent have 100 to 1000 employees, and 25 percent have more than 1000 employees.