German business sentiment on PH economy improves

Despite key risks, German firms operating in the country are more bullish on their outlook of the local economy in the next 12 months, with both investment and employment figures showing optimism, according the latest survey conducted by the German–Philippine Chamber of Commerce and Industry (GPCCI – AHK Philippinen).

The Spring 2024 AHK World Business Outlook Survey released Monday, May 13, by the GPCCI also identified key risks that could impact future economic growth, which include economic policy conditions, high energy prices, and challenges related to supply chain disruptions and infrastructure. 

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The Spring 2024 survey reports that half (50%) of the German-Philippine businesses are still optimistic in their business situation. The same trend is reported on company expectations, which showed positive results, with a majority (61%) of the responding firms forecasting confidence in business development for the next 12 months. Notably, the local economic projections in the next 12 months significantly increased by 17 points at 55 percent. Investments and employment also followed this trend with increased projections at 44 percent and 61 percent, respectively (from 39% and 54% in Fall 2023).

“It's encouraging to see such confidence from businesses involved in German-Philippine relations, forecasting a bullish local economy. This optimism surely points to a thriving environment in the Philippines for both investment and job creation over the next 12 months," said GPCCI President Marie Antoniette Mariano. 

The GPCCI statement attributed the optimism to the series of events in the first quarter of 2024 that have evidently bolstered bilateral relations between the Philippines and Germany. These events include German Foreign Minister Annalena Baerbock's visit in January, President Marcos' subsequent visit to Germany in early March, and the convening the 2nd Joint Economic Commission in mid-March. 

In terms of top risks for German businesses, the survey showed that economic policy conditions topped the list due to complex regulations, frequent policy changes, and extensive bureaucracy creating an unpredictable environment. High energy prices also pose a significant concern, impacting profit margins and operational costs, particularly for energy-intensive sectors like manufacturing. 

Additionally, challenges such as supply chain disruptions and infrastructure are tied for third, with both factors contributing to operational inefficiencies.

“To capitalize on the current economic optimism, it's imperative that the Philippine government work closely with businesses to resolve these identified challenges,” said GPCCI Board Director and Policy and Advocacy Chairperson Dr. Marian Norbert Majer.

“Addressing these issues can help create a more predictable and favorable business environment and ensure that this bullish momentum translates into substantial outcomes that will help the Philippines attain its sustained economic growth,” Majer added.

GPCCI also said that survey respondents have taken proactive steps towards enhancing the resilience of their business operations. As part of their diversification strategies, they have reported expanding their supplier networks and exploring new sales markets to mitigate the risks of future disruptions. 

Efforts at diversification are likewise facing challenges with increased legal and regulatory issues ranked as their top concern, followed by difficulties in finding suitable suppliers or business partners, and the high costs associated with expanding business operations.

Notably, more than half (55%) of respondents said they are only averagely prepared to handle international crises and geopolitical risks. GPCCI pointed to a moderate level of resilience among the survey respondents with only 34 percent consider their readiness as good. 

“Our network continuously assesses the resilience of German companies' supply chains at their international locations, aiming to significantly mitigate the risk of future disruptions, such as transport interruptions or the sudden loss of production facilities.” said GPCCI Executive Director Christopher Zimmer. “We see that our respondents in the Philippines are actively enhancing the resilience of their operations by expanding supplier networks and venturing into new markets.”

Almost 70 companies related to German-Philippines business relations participated in the spring edition survey coming from the services (59%), trade (14%), and the manufacturing or construction sectors (27%). 58% of the respondents have less than 100 employees, 25% have 100 to 1,000 employees, and 17% have more than 1,000 employees. In terms of company type, 48% of the respondents are local companies without a branch in Germany, 28% are subsidiary/branch/representations of a German company, 9% are international companies without a branch in Germany, 8% are international companies with a branch in Germany, and 6% are local companies with a branch in Germany.

GPCCI / AHK Philippinen belongs to the international network of German Chambers of Commerce Abroad (AHKs) which is represented by 150 offices in 93 countries.