The Philippines has the potential to become a trillion-dollar economy by 2030, on the back of strong remittances from Filipinos working overseas and the robust growth of business process outsourcing sector, global think tank IHS said in a report Friday.
Rajiv Biswas, IHS chief economist for Asia-Pacific, said the Philippines had an estimated gross domestic product of $292 billion this year and would grow to $695 billion by 2025 and over $1 trillion by 2030.
“Two important growth drivers for the Philippines’ economy are the rapidly-growing information technology-business process outsourcing [IT-BPO] sector and the strong flow of remittances from Filipino workers abroad,” Biswas said.
“The rapid growth of the IT-BPO industry is also creating positive transmission effects for the rest of the economy, including rapid growth in demand for commercial floor space, underpinning the development of existing and new office parks in urban centers,” Biswas said.
The Washington-based IHS also cited the Philippines as the only sovereign entity in Asia with improving credit prospects.
IHS, whose reports are used as reference by other organizations including credit-rating agencies, investment banks and development institutions, cited the trend of improving financial fundamentals, investor confidence and governance standards in the Philippines.
IHS said in its “Sovereign Risk Review” report for the third quarter of 2015 it also upgraded its outlook on the Philippines’ credit rating from “stable” to “positive.”
The improved outlook means that the Philippines’ existing credit rating with IHS, set at the minimum investment grade of “BBB-“, had a chance of being raised over the near term.
The Sovereign Risk Review compares and assesses every sovereign worldwide across ratings agencies.
IHS said in the report the strong macroeconomic fundamentals in the country were accompanied by improvements in governance.
“Apart from the clearly strengthened macro-financials over the last few years, the more recent upgrade to the Philippines’ outlook to positive in third quarter rested on improved governance standards and reforms enhancing competitiveness under the Aquino administration,” it said.
The Philippines is the only sovereign in Asia that garnered a positive action from IHS.
IHS recognized the Philippines’ comfortable liquidity as evidenced by sustained surpluses in its current account, as well as continually improving manageability of debt on the back of prudent fiscal management and growing economy.
The Philippines’ current account, fueled by remittances, revenues from the business process outsourcing industry and tourism receipts, posted a surplus of $4.7 billion in the first six months of 2015. The country’s current account has been in surplus for 12 consecutive years, or since 2003.
The Philippines’ general government debt as a percentage of gross domestic product, a measure of debt manageability, was on a downward trend. It stood at 36.2 percent as of end-June 2015, consistently declining from a peak of 68.1 percent in 2003.
“The Philippines has been on a long ratings upgrade trajectory over the last few years. The key driver to these upgrades has been successively strong current account surplus generation with newfound sources of export earnings other than workers’ remittances and lower energy import bills,” Jan Randolph, IHS director of sovereign risk, said in a statement.
