Manila, Philippines, 22 May 2025 - In a recent panel discussion at the APLMA Philippine Loan Conference in Manila moderated by Quisumbing Torres Corporate and Commercial/M&A Partner and Head of Financial Institutions Industry Group Alain Charles Veloso, experts delved into the outlook for acquisition finance in the Philippines, highlighting the current landscape, risks, and opportunities. The conversation began with a poll question that set the stage for the discussion: "What is the biggest risk in acquisition financing transactions in the Philippines today?" The results indicated that political uncertainty and geopolitical risks were the top concerns, followed closely by credit risk and interest rates.
Macroeconomic Conditions and Financial System
The panelists emphasized the relatively stable macroeconomic conditions in the Philippines compared to other countries in the region. Despite being import-dependent, especially for energy, the Philippines boasts a robust financial system. This stability is attributed to the hard lessons learned by financial sector regulators and banks over the years, including the pandemic. The country's banks are known for their rigorous risk assessment and aggressive lending practices, supported by ample liquidity in the banking sector.
Positive Economic Outlook
The discussion highlighted the positive economic outlook for the Philippines, with GDP growth projected to reach around 5.9% by year-end. Inflation rates have been kept at bay, and policy rate cuts are expected to further stimulate economic activities in the second half of the year. This optimistic outlook is shared by both investment banks and private equity funds, despite the uncertainties brought about by geopolitical situations.
Opportunities in Manufacturing and Service Sectors
The panelists explored the potential opportunities arising from the US-China trade war, particularly in the semiconductor industry. While the Philippines has a long history in semiconductor assembly, there are challenges in quickly capitalizing on the manufacturing vacuum left by China. However, the country still excels in the service sector, particularly in knowledge processing and business process outsourcing, with a strong presence of multinationals.
Key Sectors for Acquisition Finance
Several sectors were identified as primary engines for acquisition finance in the coming year. Renewable energy, infrastructure, logistics, and healthcare were highlighted as areas with significant growth potential. The energy sector, in particular, has seen a surge in project finance and acquisition financing, driven by the country's focus on renewable energy. The digital economy and consumer-driven sectors also present promising opportunities, due in large part to the favorable demographic profile of the country.
Role of Non-Bank Lenders
The discussion touched on the role of non-bank lenders and institutional investors in the acquisition financing landscape. These players are seen as complementary to traditional banks, offering longer tenure loans and more sophisticated financing solutions. The rise of private credit and direct lending solutions was noted, with mezzanine loans and other high-risk instruments becoming more prevalent.
Policy Developments and Reforms
Looking ahead, the panelists emphasized the importance of policy developments and reforms in shaping the acquisition financing landscape. Pro-business policies, improvements in digital infrastructure, and the implementation of the Ease of Business Act were identified as key areas for growth. Additionally, the exemption of projects of national significance from the Single Borrower's Limit was seen as a significant contributor to financing.
The panel discussion provided valuable insights into the current state and future prospects of acquisition finance in the Philippines. With a stable financial system, positive economic outlook, and opportunities in key sectors, the country is well-positioned to navigate the challenges and capitalize on the opportunities in acquisition financing. The complementary interplay between traditional banks and non-bank lenders, coupled with supportive policy reforms, will play a crucial role in driving growth in this area.