The Euromonitor International’s Risks and Vulnerabilities Country Briefing and Business Environment report for the Philippines highlights the reasons why the Phlippines should not be ruled out as an important investment destination, despite the devastation wrought by Superstorm Haiyan (Philippine name: Yolanda) in November.
The Philippines is a member of the Association of Southeast Asian Nations (ASEAN) and accounted for 10.8% of their total GDP in 2012;
Real GDP growth reached 6.8% in 2012, amongst the fastest growth of the ASEAN countries;
The Philippines benefits from a buoyant business process outsourcing (BPO) sector with services accounting for 57.1% of GDP in 2012;
Remittances inflows accounted for 9.8% of GDP in 2012 and grew by just over 50.0% in US$ terms in 2007-2012. The typhoon could well result in a spike in remittances during 2013 and 2014;
With total exports accounting for 20.8% of total GDP in 2012, the Philippine economy is not overly export-dependent for economic growth. It is likely that the worst effected exports will be from agricultural products that were wiped out by the typhoon;
The general government budget registered at just 0.9% of GDP in 2012. Its public debt stood at 41.9% of GDP in 2012, meaning that government finances are in a strong position to be able to invest and assist in aid and reconstruction;
The Philippines’ credit rating reached investment grade status in 2013 highlighting the country’s macroeconomic fundamentals.
Challenges
The report studied as well the challenges that the Philippines have to contend with to maintain its good economic performance.
Weather remains to be a challenge. The Philippines will continue to experience weather-related disasters in the future. Storms and flooding affected 24.9 million people and caused damages of US$3.2 billion in the 2007-2012 period, according to EM-DAT.
Corruption remains a problem and the Philippines rank poorly in the World Bank’s Ease of Doing Business 2014 at 108th out of 189 countries. Nevertheless, the latest ranking saw a major upwards improvement of 25 places compared to the previous year.
Other challenges include a significant brain drain resulting from the large number of emigrants leaving the country, poverty, a high youth unemployment rate and persistent income inequality.
Overall, Euromonitor concludes, the Philippines offer long term promise with a young and largely English-speaking population. “We maintain that it will continue to be one of the main emerging market economies to watch.”
Source: Risks and Vulnerabilities Country Briefing and Business Environment report for the Philippines , Euromonitor International.