HSBC sees corporate investment recovering in H2

Manila, Philippines — Philippine businesses might see a gradual resurgence in investment spending during the second half of the year, as the economy recovers and inflationary pressures ease, according to HSBC Philippines. Earlier this year, weaker corporate profitability due to lower revenue and higher costs had impacted the sector.

HSBC Philippines President and CEO Sandeep Uppal explained that the slowdown in the broader economy had trickled down to individual companies, resulting in reduced revenue growth and elevated input costs. Uppal emphasized that a company's profitability typically drives its investment decisions, so reduced profitability led to lower investment.

He anticipates the trend to reverse in the latter half of the year as economic activity improves and inflation either stabilizes or declines. The beginning of traditionally stronger consumption months in September should also boost demand. While the economy remains sluggish, overall credit demand remains close to historical levels, indicating that companies have not drastically reduced borrowing.

HSBC is also observing continued foreign capital inflow into select sectors, with renewable energy and global capability centers being notable areas of investor interest. These sectors are seeing substantial commitments from both overseas and local investors. HSBC chief Asia economist Frederic Neumann highlighted that despite the recent economic slowdown, the Philippine economy remains fundamentally robust, attributing the weakness to external factors such as higher energy and commodity prices, as well as weaker government spending.

Neumann expects the economic recovery to accelerate once energy and food prices normalize and government spending picks up.