PHL set for investment-led boom, says BMI

THE Philippines is on track to become a trillion-dollar economy by 2033 as it is seen to be well-positioned for an investment-led boom, according to BMI, a Fitch Solutions Company.

The economy is expected to post a real GDP growth of 6.8 percent this year driven by recent economic reforms, demographic trends and higher infrastructure spending.

BMI’S bullish scenario showed that the economy may expand by an average of 7.2 percent across their 10-year forecast horizon.

“The Philippines has been one of the fastest-growing emerging markets in Asia and will remain so in the next decade,” BMI said.

“In fact, it appears on track to become a trillion-dollar economy by 2033, putting it in the same category as the likes of Thailand and Vietnam,” it added.

Economic reforms cited by BMI included efforts to relax restrictions on foreign ownership in selected industries. BMI noted that the economic charter change being espoused by the current administration will complement these efforts.

The previous administration passed reforms that included the amendments to the Public Service Act as well as the Foreign Investment Act.

In terms of demographic trends, the country’s young population is expected to help the Philippines attract low-end manufacturing processes from China.

The Philippine Statistics Authority estimated that by July 2030, there will be a total of 120.06 million Filipinos. More than half of this population or 81.56 million will be between 15 and 64 years old, the ages included in the country’s labor force.

“As tensions between Beijing and Washington intensify, foreign investors will continue to withdraw their investments from China. is shift in global capital away from the Chinese market could potentially enhance the appeal of the Philippines as a destination for investors,” BMI added.

e government’s efforts to address the country’s infrastructure constraints has already translated to better Foreign Direct Investment (FDI) inflows to an average of 2.6 percent of GDP since 2017, higher than the 1.5 percent of GDP between 2010 and 2016.

BMI said the main drag for the country is high corporate income taxes that are currently at 25 percent—considered the highest in the region.

Efforts to bring this rate further down to 20 percent are currently

under way. BMI noted that the proposal, as of April 14, has passed the second reading at the House of Representatives.

Meanwhile, the threats to the BMI outlook include the scenario that the government fails to make the necessary human capital investment. e Philippines has struggled with brain drain caused by a high jobs-skills mismatch and poor employment opportunities. Low-quality jobs have been known to push Filipinos to other countries where they work as migrant workers.

“Ideally, an increase in foreign investments would create better employment options and enhance wage competitiveness. However, should these investments not come to fruition, the inability to retain these skilled professionals will create a significant gap in the local workforce, thereby impeding productivity gains in the country,” BMI said.

Another considerable threat is the lag in Artificial Intelligence (AI) integration in the country. This, BMI said, should be addressed by the urgent need for skill development.

Due to this, the country’s Business Process Outsourcing (BPO) industry, which employs 1.5 million and contributes 7.5 percent to the country’s GDP, is threatened by Large Language Models (LLMS).

“If the Philippines fails to successfully upskill its workforce, it faces the risk of widespread job displacement as generative AI advances. India seems to be ahead in this regard and stands to gain a larger market share if the Philippines loses its competitive edge,” BMI said.

Volatility to shake peso

MEANWHILE, in a separate report, BMI also said the Philippine peso is expected to “come under much volatility” due to interest rate expectations in the United States.

In the longer term, BMI expects the peso to weaken to an average of P57.2 to the US dollar by the end of 2025. On Tuesday, the peso depreciated to P57 to the greenback, the lowest level since November 2022.

On Wednesday, the peso closed at P57.18 to the dollar. is is a new two-year low since November 2022 when the peso closed at P57.203 to the greenback.

e peso opened and traded at a low of P57.1 to the dollar. It traded at a high of P57.333 to the US dollar on Wednesday.