Wealth Managers Take Note: The Philippines Is One To Watch

Chrissy Coleman

10 September 2012

Emerging economies are dominating economic growth forecasts, but the Philippines is being hailed as one particular "bright spot" to watch, as cited in the New York Times this week.

According to data released last week, the Philippine economy grew by 5.9 per cent in the second quarter, above speculators’ estimates but below the first quarter performance of 6.4 per cent, which outpaced all other countries in the region, except China.

So what’s changed within a country that has previously faced major socio-economic challenges? There are a number of factors that are driving positive attention in its direction, according the New York Times.

Firstly, its contribution of $1.0 billion to the International Monetary Fund in June this year instilled some confidence - As while many struggling European countries face mounting debts, the Philippines paid back the last of its IMF loans back in 2006. In view of this prospective financial stability and of Standard & Poor’s recent upgrading of the country’s debt rating to just below investment grade, investors could soon be scoping out money-making opportunities. This is supported by recent Philippines Stock Exchange performance outpacing benchmark indices in Malaysia and Indonesia, and its main index reaching 19 record highs since the start of 2012.

Demography

Secondly, socio-economic factors contributing to the nation’s increasing competitiveness include the demographic of the growing population – with 61 per percent of its inhabitants being of working age, the Philippines benefits from a young workforce , providing an advantage over its ageing Asian neighbours. And politically, measures have been taken to warrant increased stability, including "aggressive action to address corruption", as cited by the New York Times.

Thirdly, the services sector is booming. “The Philippines, where English is widely spoken, surpassed India last year as the world’s leading provider of voice-based outsourcing services like customer service call centres," said the New York Times in its recent report. And outside the country, 9.5 million Filipino expats are contributing to the wealth pool, responsible for repatriating approximately $20billion of revenue to their home country in 2011.

Looking ahead, the future could be bright for the Philippines. It holds an estimated 21.5 billion tons of metals in the country that have yet to be exploited. The export and manufacturing industry, while underdeveloped so far, is a potential source of growth, if other Asian economies’ success stories are anything to go by. The New York Times also noted that the Philippines, 44^th largest economy in the world, holds an estimated US$70 billion in reserves and its local currency, the Peso, recently reached a four-year high against the dollar.

This has led to many investors citing the country’s growth potential - Citi Private Bank for one has included the Philippines among in its list of Global Growth Generators (“3G” countries), that over the next 5, 10, 20 and 40 years are expected to deliver high growth and profitable investment opportunities.

HSBC recently estimated that based on current trends, the 92million people-strong country is on course to work its way up the ranks to become the 16th largest economy in the world by 2050. Supporting this view, the Wealth Report 2012, published by Frank Knight residential group, forecast the country’s GDP to grow at an average annual rate of 7.3 per cent between 2010 and 2050 – placing the nation’s economic rating not far behind rising BRIC star, India, with an 8 per cent GDP growth forecast. Watch this space.