The Philippine economy can more than quadruple to $1.2 trillion by 2030 from its current $280-billion size in gross domestic product (GDP) terms and become one of the largest markets of the future in the region, said a forecast by global information firm IHS.
The Asian laggard has transformed itself from a ‘pussycat’ to a ‘tiger’ economy over the last 10 years and is set to become one of the largest consumer markets of the Association of Southeast Asian Nations (Asean), Rajiv Biswas, Asia-Pacific Chief Economist at IHS, said.
But the challenge remains for the country to improve the business climate, alleviate poverty and unemployment, to sustain its rapid pace of growth, he said.
Biswas said the economy has the capacity for robust long-term economic growth of about 4.5 percent to 5 percent per year over the 2016 to 2030 time horizon.
“This will transform the Philippine economy from its current $280-billion to become a $680-billion economy by 2024, with a projected GDP of $1.2 trillion by 2030,” Biswas said.
The global information firm forecasts total GDP per person in the country will rise from about $2,800 in 2014 to about $5,800 by 2024.
“This has considerable implications for the size of the Philippine consumer economy. These significant increases in per capita GDP will create one of Asean’s largest consumer markets of the future, as the middle class rapidly expands over time,” he said.
“The Philippine economy has undergone a remarkable transition from a pussycat into a tiger economy over the last decade. However, sustained rapid growth will require continued economic reforms to improve the business climate of the Philippines, making it more attractive for foreign direct investment into sectors such as manufacturing and tourism,” the analyst said.
Two key growth drivers
The IHS analyst said the rapidly growing information technology-business process outsourcing (IT-BPO) sector and the strong inflow of remittances from overseas Filipino workers (OFW) are two important growth drivers of the economy.
Export revenue from the IT-BPO sector has more than doubled since 2008 until 2013, reaching an estimated $13.3 billion. That has created positive impact on the economy, including rapid growth in demand for commercial floor space, underpinning the development of existing and new office parks in urban centers, Biswas said.
Meanwhile, OFW remittances rose to $25 billion in 2013, providing a key source of strength for the Philippine balance of payments, he said.
Challenges to growth
IHS sees GDP growing at 6.2 percent this year, which is far below the 7.2 percent expansion achieved in 2013 and the government’s growth target range of 6.5 percent to 7.5 percent for 2014.
“Poverty and unemployment remain very high in the Philippines, with around 28 percent of the population still living in poverty according to government estimates, while the total number of unemployed or underemployed workers exceeds 10 million,” Biswas said.
He added that the long-term outlook will be heavily dependent on the country’s ability to make the manufacturing sector more competitive and to mobilize both foreign and domestic investment flows into the manufacturing sector.