THE Philippines’ growth story in 2015 is being driven by consumer industries and construction against a backdrop of approaching elections and regional integration, according to a country report launched recently by the Oxford Business Group (OBG).
The Report: The Philippines 2015 explores the key part that business process outsourcing (BPO) and rising remittances are playing in driving a broader-based economic growth, which it expects will remain close to 6 percent over the next five years.
It also considers the challenges that the country faces, led by infrastructure bottlenecks, looming energy supply concerns and streamlining of bureaucracy.
OBG’s latest report shines the spotlight on the country’s plans to introduce market reforms over time, as it moves to push up exports and investment. There is also detailed coverage of the Philippines’ industries which are benefiting from a rise in business activity and increased consumer spending power, with a particular focus on new growth segments in areas such as electronics and light manufacturing resurgence.
Managing editor for Asia, Paulius Kuncinas, said that an increased focus on competitiveness and added value was expected to help firms integrate into the Asean market, including new entrants.
“Our research indicated several positives for the Philippines ahead of the AEC,” Kuncinas said, referring to the Asean economic community.
“We always look at the country in an investment point of view. We are convinced that the Philippines is one of the hottest and most attractive investment destinations, not just in the region but globally. There has been a huge shift in investment sentiment away from traditional emerging markets,” he said.
PH alternative to China, India
Investors see the Philippines as an alternative to China and India, according to the report. Most multinationals are already here in the Philippines. In 2014, the growth has slowed down to a very acceptable 6.1 percent from 7.2 percent in 2013, which is good to avoid economic overheating, the report said.
The Philippines is more stable because it is driven by domestic consumption than other tiger economies which are driven by exports.
“Many of these, such as the country’s rising consumer spending power and the expansion of BPO into secondary and tertiary cities, will be of key interest to investors at a time when the Philippines, like other Asean members, is finding itself in the spotlight, ” Kuncinas added.
The Report: The Philippines 2015 marks the culmination of more than six months of field research by a team of analysts from OBG. The publication assesses trends and developments across the economy, including macroeconomics, infrastructure, banking and other sectoral developments.
With government spending on public infrastructure projects set to reach 4.1 percent of GDP in 2015, rising to 5 percent in 2016, The Report: The Philippines 2015 highlights the major overhaul earmarked for the country’s road network and ports, as efforts to improve connectivity are stepped up.
The publication analyses the rapid expansion under way in the construction and real estate sector, as big-ticket and strategic public-private partnership (PPP) projects take shape, with affordable housing set to be another priority.
BPO: Leading employment generator
Other areas of the economy explored include the BPO segment, the nation’s leading employment generator and major source of investment attraction into the country, and IT, where a mobile penetration rate of 104.5 percent suggests plenty of potential for growth.
Andrew Jeffreys, OBG’s CEO, said that investors were taking note of the Philippines’ favorable demographics, improving governance and strong economic growth, which is expected to remain close to 6 percent to 2020.
“While the country’s large, qualified workforce has long been recognized as one of its strengths, our new report indicates that untapped potential is greater than ever, particularly in rapidly developing sectors, such as IT,” he said.
“Public and private efforts to support local technological innovation should increase the sector’s prospects for growth, with anticipated new infrastructure a bonus,” Jeffreys said.
The Report: The Philippines 2015 has been produced with the Makati Business Club and the Philippine Chamber of Commerce and Industry. Contributions have also been made by Bangko Sentral ng Pilipinas, the professional services company Punongbayan and Araullo, the law firm Sycip, Salazar, Hernandez & Gatmaitan and BDO Capital & Investment Corporation.