IMPROVING global sentiment is likely to help the Philippine economy achieve investment-led growth this year, a Standard Chartered Bank report said on Thursday.
“The Philippines has made some progress in improving investment-driven growth.
We note that investment growth has contributed at least 1.5ppt [percentage point]to GDP [gross domestic product]growth over the past seven quarters, providing the economy with a secondary growth driver,” Standard Chartered said in its latest report titled “Philippines—What Philippine clients think.”
The bank said that the Philippines is investing in future productive capacity as net foreign direct investment (FDI) rose by 36.6 percent year-on-year in the first 11 months of 2013.
This year, the bank said that the country’s investment story looks set to benefit from certain trends, adding that it is likely that better global growth will support stronger foreign direct investment (FDI) growth in the Philippines.
These trends, according to the report, include big investors from Japan and the United States coming into the country; and higher labor costs in China driving production chains toward lower labor cost destinations in Southeast Asian countries like the Philippines.
“With an English-speaking population and a sizable labor force, it is likely that the Philippines has the excess capacity to benefit from these trends in 2014,” it stated.
However, the bank noted that while progress has been made, the Philippines has a relatively low investment-to-GDP ratio compared with other Southeast Asian economies, with 20.2 percent in 2013 from 19.4 percent in 2012.
“This will need to be driven higher by both domestic and external sources—we note that in 2013 that the Philippines remained dependent on domestic investment. The increase in investment growth needs to be sustained in order for the economy to benefit in the long term,” it added.
Data from the Bangko Sentral ng Pilipinas showed that FDI which flowed into the country January to November last year reached $3.6 billion. These FDIs originated mainly from Mexico, Japan, US, British Virgin Islands and Singapore, and were channeled mainly to manufacturing; water supply, sewerage, waste management and remediation; financial and insurance; real estate; and arts, entertainment and recreation activities.
This year, the central bank is seeing a $2.6-billion net FDI.