Rising inflation, a weakening peso, and global geopolitical instability are combining to apply significant cost pressures on the Philippine construction industry.
Despite these compounded economic headwinds, construction consultancy Hearn and Hearn notes that the situation has not yet reached crisis levels, leaving the sector navigating a tight but manageable financial landscape.
‘The industry is under real pressure, but I would not call it a crisis. Inflation at 7.2 percent in September, the peso having fallen to record lows beyond P63 to the dollar, and oil back above $100 a barrel have made almost every construction material more expensive,’ Michael Hearn, executive director of Hearn and Hearn, said in an email interview with the BusinessMirror.
‘What concerns me more than the price is the volatility. When costs move week to week, contractors price at risk, developers defer decisions, and projects that made financial sense earlier in the year have to be repriced and reconsidered,’ he added.
Hearn said the first half of the year was marked largely by a fuel shock, as the conflict in the Middle East drove oil prices higher, initially affecting freight, hauling and energy-intensive materials such as cement.
Demand, however, remains weak. Construction output contracted by 14.8 percent in the second quarter, while government infrastructure spending fell 36 percent year-to-date as of July, he said.