GDP seen doubling by 2026 as Philippines ‘set for dynamic growth’

MANILA, Philippines — The Philippine economy is still expected to experience sustained and rapid growth in the long term, with gross domestic product (GDP) seen doubling between now and 2026, enabling the country to attain upper middle income status by 2022.

In an economic research report released yesterday, market intelligence firm IHS Markit said the continuous growth of above six percent in the past seven years is likely to continue over the short term, although at a slightly slower pace of around six percent annually over 2019 and 2020.

“Strong GDP growth is projected to continue over the medium term, with the total size of the Philippines economy expected to double between 2018 and 2026,” said Rajiv Biswas, IHS Markit chief economist for Asia Pacific.

The long-term outlook, he said, is “ very positive” with GDP seen doubling from $330 billion in 2018 to $672 billion by 2026.

“The Philippines is forecast to become one of Asia’s trillion-dollar economies by 2032, with per capita GDP reaching around $8,200. Over the next decade, sustained rapid economic development will result in a significant reduction in poverty levels and accelerate progress towards meeting the UN Sustainable Development Goals,” the report said.

The domestic economy is now powered by several growth engines such as the sustained strength of remittance inflows from Filipino workers abroad which is helping boost consumption spending.

Rapid growth of service exports, notably from the IT-BPO sector, is now contributing to export earnings and employment growth.

Despite external headwinds, the electronics industry remains the largest merchandise export sector.

The government’s ambitious infrastructure development program is also supporting the economic growth momentum.

With per capita growth having shown rapid growth since 2010, the number of middle class households have expanded, driving consumption spending.

IHS Markit said by 2022, per capita GDP in the country is expected to exceed $4,000, pushing it into the ranks of upper middle-income developing countries, according to World Bank standards.

When this happens, this will give the economy an enormous spending power that will support major industries in the country.

“The Philippines is also one of the most populous countries in Southeast Asia, and as per capita GDP levels rise above the upper middle-income threshold, this will create an increasingly substantial consumer market that will support the growth of the nation’s manufacturing, services and construction industries,” the report said.

At this point, IHS Markit urged the country to immediately address hindrances to growth such as weak infrastructure and its uncompetitive business climate.

“Significant challenges remain to the nation’s economic development, including weak infrastructure and a relatively uncompetitive business climate compared to other East Asian peers,” the report said.

“A key priority will be to make the Philippines more competitive as an investment hub for multinationals, in order to boost exports of goods and services and narrow the trade deficit,” it added.

On the socioeconomic level, high levels of poverty in the country particularly in the rural regions is making a large number of the population vulnerable to economic and environmental shocks.

“Despite the significant progress in achieving higher living standards during the past decade, one of the key economic development challenges facing the Philippines is the high level of poverty, particularly in rural regions,” IHS Markit said.

“The vulnerability of the population to natural disasters is also high, due to the frequent incidence of destructive typhoons that devastate agricultural crops, as well as the nation’s vulnerability to earthquakes. Manila is located in an area near two major seismic fault lines,” it added.