Fitch-owned BMI Research said the Philippines is one of the 10 emerging markets of the future and could reach a similar economic status as the Netherlands or Bulgaria by 2025.
The Philippines’ GDP would need to double in size to reach the level of the Netherlands, or more than double in GDP per capita terms to reach a similar size as Bulgaria, the report explained.
“Just as China, India, Brazil and Russia have become important markets for investors over the past two decades, many less developed emerging markets will emerge as the next set of key investment hot-spots over the next decade,” it said in a report.
The 10 emerging markets of the future, according to BMI, are the Philippines, Indonesia, Nigeria, Bangladesh, Egypt, Vietnam, Paki stan, Myanmar, Ethiopia and Kenya.
“In order to shortlist these countries, we considered those with per capita income of about $3,500 and below, that enjoy strong enough economic and political institutions to enact reforms, are set to enjoy rapid economic growth, boast a potentially large domestic market and have an infrastructure deficit that will lead to productivity-enhancing investment,” it explained.
BMI said a large domestic market implies strong growth opportunities for consumer industries.
“Moreover, large populations will provide significant opportunities for infrastructure and construction as urbanization rates rise,” it said.
Stronger institutions are typically associated with better policymaking, the protection of property rights and reform, which help to underpin growth, it added.
The think tank said countries that experience strong economic growth will provide strong investment opportunities and returns.
Lastly, an infrastructure deficit suggests significant room for infrastructure-led productivity growth, and given the increasing reliance on public-private partnership models of funding, provides investors with significant opportunities, it said.
BMI said the 10 countries have the potential to transition into key emerging markets and will cumulatively add $4.3 trillion to global gross domestic product (GDP)—roughly the equivalent of Japan’s economy by 2025—providing significant opportunities for investors.
5.8% average GDP growth
For the Philippines, the think tank said the economy has benefited from improvement in its macroeconomic fundamentals in the past six years, and as a result, should see annual average growth of 5.8 percent over the next decade.
This means the economy will potentially more than double in size from $312 billion in 2016 to $756 billion by 2025, which is similar to the current size of the economy of the Netherlands.
On a per capita basis, GDP will more than double from about $3,000 in 2016 to $6,347 over the next decade, which is similar to the level seen in Bulgaria currently.
BMI noted that the Philippines has the world’s 12th-largest population at 101 million, and benefits from strong remittance flows from expatriate workers, forming the foundation of a large domestic market.
“Given these dynamics, we believe that the Philippines will become an increasingly important market for investors,” it stressed.
Despite the optimistic outlook, BMI pointed out that the main risk to this view is once again policy continuity, mainly because President-elect Rodrigo Duterte has not yet revealed a comprehensive economic plan.
“Any large deviation from the prudent and business-friendly macroeconomic policies of the outgoing Aquino administration could pose risks to investment into the Philippines, as well as domestic business confidence, which would weigh on growth,” it warned.