MANILA - Strong consumption spending will sustain the Philippines’s economic growth to around 7 percent this year and next year, according to local analysts.
In a briefing at the media launch of the 13th Pacific Region Investment Conference on Thursday, COL Financial Group Inc. Head of Research April Lee-Tan said there is “nothing stopping” the economy from posting a 7-percent growth this year, given the strong 7.6-percent growth in the first semester of 2013. Tan said she expects “more of the same” level of growth in 2014.
“We’re very positive in the economy, largely because of our huge consumer base. In the Philippines 70 percent of our GDP [gross domestic product] is consumption. The drivers remain intact,” Tan said.
Tan said these growth drivers include overseas Filipino worker (OFW) remittances, the strong business-process outsourcing sector and other new sources of consumption growth.
She said the increased availability of consumer credit, for one, would allow consumers to increase their spending for real estate, vehicles and other investments. The stable growth in auto sales, Tan said, could already be indicative of this phenomenon.
Tan also said that in light of recent disasters, there is a possibility that the spending allotted to rehabilitation efforts in earthquake-affected areas would boost growth in those areas and translate into higher Philippine GDP growth.
“Believe it or not, GDP actually picks up during times of calamities. During times of calamities, people are forced to spend and what is captured by GDP is the actual spending. What we are fortunate to have at this point is that the government is in a position to [spend],” Tan said.
Apart from these short-term growth drivers, another key source of growth of the Philippine economy is its demographic dividend, Tan said. She noted that the average age of Filipinos is only 23 years old, which means a strong and steady supply of labor would keep the economy going for years to come.
Tan said this is one of the attractions of the Philippines to firms abroad and is one of the reasons the country remains a favored destination of outsourcing firms.
BDO Private Bank Wealth Advisory and Trust Group Senior Vice President Rafael Ayuste Jr. said apart from consumption, the younger population is also driving the growth in financial investments.
Ayuste said young Filipinos are now more investment-savvy and are aggressive when it comes to their investment portfolio. He attributes this to the perception that the younger generation believes it is “invincible” and this now translates into their investment decisions.
“They are more inquisitive and any additional information they need, they search online. They come up with very intelligent questions,” Ayuste said.
Overall, Ayuste said, Filipinos are now more investment-savvy and are now willing to invest for longer periods of time, longer than 10 years.
He attributes this to the increased financial education of Filipinos, that the management of financial institutions and even trusts are now being taught in school.