With an expanding labor force, the Philippines will be eclipsed only by India among emerging markets expected to post the fastest economic growth in the next 10 years.

In a Feb. 15 report, UK-based Oxford Economics projected the Philippines’ gross domestic product (GDP) to grow by an average of 5.3 percent between 2019 and 2028, only outpaced by India’s 6.5 percent.

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In a separate report in January, the think tank said it was expecting the Philippines’ GDP growth for 2019 at 6.1 percent, below the government’s 7-8 percent target range.

China and Indonesia’s economies were both seen expanding by 5.1 percent during the 10-year period; Malaysia, 3.8 percent; Turkey, 3 percent; Thailand, 2.9 percent; Chile, 2.6 percent; Poland, 2.5 percent; and South Africa, 2.3 percent.

The labor force in the Philippines was projected to increase by an average of 2.3 percent during the next 10 years, the fastest among the 10 emerging markets.

The labor force growth figure was computed by Oxford Economics as the number of people in the labor force multiplied by the average number of hours worked.

Total factor productivity growth—a measure of the efficiency of a production process—was seen at 1 percent, while capital deepening—or the contribution of capital accumulation to labor productivity growth—was projected to rise by 1.6 percent during the 10-year period.

In a report titled “Sustained growth in [emerging markets] calls for thrift and innovation,” Oxford Economics said while “countries with higher gross domestic savings (as a share of GDP) tend to have higher trend growth… the Philippines seems to be a major outlier, but its domestic savings are supplemented heavily by remittances.”

Oxford Economics head of Asia economics Louis Kujis added “emerging markets with sustained fast growth are distinguished by rapid capital accumulation—mainly domestically financed—and robust total factor productivity growth.”

“We find that sustained total factor productivity growth requires a focus on innovation and research and development (R&D), especially in middle-income countries,” Kujis added.

The Philippines’ growth of 6.2 percent in 2018 was the slowest in three years as high consumer prices dented consumption and investments.

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“We expect growth to remain around current levels in 2019, with investment growth leveling off amid weak business sentiment. Net exports are also likely to continue to be a drag on GDP growth, as the government’s infrastructure program keeps demand for capital goods imports elevated and exports growth remains muted due to slowing Chinese demand,” Oxford Economics assistant economist Thatchinamoorthy Krshnan said.

However, higher interest rates—monetary authorities’ response to last year’s elevated inflation—may increase bad loans in the Philippines, according to Oxford Economics.

“Rising bad bank loans are a risk in several [emerging markets] where interest rates have risen steeply in the past year, such as Pakistan, Turkey, Argentina, the Philippines and Indonesia,” Oxford Economics lead economist Adam Slater said in a Feb. 7 report titled “EM debt: the bubble may already have burst.”

The Monetary Board jacked up key interest rates by a total of 175 basis points last year.

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