MANILA, Philippines - The economy may grow by an average of 5.5 percent next year until 2020, analytics firm IHS said yesterday.
“The Philippine economy has the capacity for robust long-term economic growth to average around 5.5 percent per year over the 2016 to 2020 time horizon,” Rajiv Biswas, chief economist for Asia-Pacific at IHS, said.
“IHS forecasts that total GDP (gross domestic product) per person in the Philippines will rise from around $3,000 in 2015 to around $6,000 by 2024,” Biswas said.
The estimated increase in the per capita GDP should make the country one of the largest consumer markets in Southeast Asia, the economist said. Such a scenario, he added, would attract more foreign investments to the country especially to its manufacturing and services industries.
Philippine economic growth slowed to 6.1 percent last year from 7.2 percent in 2013. The government hopes to grow the economy by seven to eight percent this year until the next.
Biswas said the economy’s key growth drivers would continue to be the IT-business process outsourcing sector and the robust inflows of remittances from overseas Filipino workers.
“The competitiveness the Philippines in this industry has been particularly helped by the large pool of university-educated workers as well as the strong English-language skills of the workforce,” Biswas said.
According to Biswis, export revenues from the IT-BPO sector has more than doubled to $18 billion in 2014 from 2008, while the number of employees in the sector surpassed one million.
“By 2016, the Philippines IT-BPO industry is projected to have 1.3 million employees. The rapid growth of this industry is also driving economic development in a number of cities across the Philippines, with Manila and Cebu now ranked among the world’s leading IT-BPO hubs,” Biswas said.
“The rapid growth of the IT-BPO industry is also creating positive transmission effects for the rest of the economy, including for the commercial property sector, with rapid growth in demand for commercial floor space, underpinning the development of existing and new office parks in urban centers,” he said.
At the same time, remittances from Filipinos working and living abroad climbed to a record high of $26.9 billion last year.
“Overseas worker remittances are a key driver of GDP growth in the Philippines, as they provide support consumer expenditure and also residential housing construction,” Biswas said.
The analyst said there is an estimated 35 percent of the total annual remittances finding its way into residential property purchases, supporting the expansion in the residential construction sector in major cities in the country.
“While the current growth drivers of the Philippines are the IT-BPO industry and the strong and stable remittances of the overseas Filipino workers, the long-term outlook for the future development of the Philippines will be heavily dependent on the ability to make the manufacturing sector more competitive and to mobilize both foreign and domestic investment flows into the manufacturing sector,” Biswas said.
He said a key challenge for the country remains to be improving the business climate in order to rake in more foreign investments.
“While the Aquino government has made efforts to improve this ranking, there is still a great deal of work to do to improve the overall competitiveness of the Philippines to attract large inflows of foreign direct investment,” Biswas said.
Read more on The Philippine Star