The Philippines is a promising country, offering significant potential to investors. Its exports are moving away from agriculture towards higher value manufactured goods. The country has a virtually untapped mineral-rich south, which could be more accessible if political progress in the region continues on the right track.

Our coverage – using our unique Total Analysis model – ensures that our clients make well-informed investment decisions in the Philippines. Our teams keep them informed of the latest market moves and political developments as part of our 'top-down' and 'bottom-up' perspective. We also provide in-depth analysis of the Philippines’ 21 most important industries. Our winning combination of interactive data and forecasting, alongside our risk-assessed and results-proven analysis, will ensure that you, as one of our clients, are always one step ahead in the Philippines.

Country Risk

Philippines Country Risk

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Core Views

• While the Philippine economy performed poorly in Q314, owing to lacklustre fiscal spending and the surge in import growth, we nevertheless remain positive on the economy. Strong domestic demand should continue to provide support. That said, potential growth headwinds ahead will pose downside risk to our 2015 real GDP growth forecast of 6.0%.

•Falling oil prices and the deceleration in money supply growth should keep inflation manageable over the coming months. That said, we continue to see one 25 basis points rate hike in H215, owing to potential price pressures emanating from still strong credit growth.

•Continued budget discipline by the Philippine government will keep the country's fiscal position on a sustainable trajectory over the coming years. We forecast the country's fiscal deficit to narrow from an estimated 0.8% of GDP...

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Philippines Operational Risk Coverage (9)

Philippines Operational Risk

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The Philippines poses considerable security threats to international investors, and we hold a generally bearish outlook in regards to criminal, terrorism, and interstate conflict risks.

Petty crimes, particularly those to the person, remain a pertinent issue in the Philippines, affecting both locals and foreign tourists and business travellers. Organised crime is also an issue, with foreign criminal gangs, particularly from China, Hong Kong, and Taiwan, operating in the country. As with most countries, but especially emerging markets, official crime statistics understate the true level of crime. The Philippine National Police (PNP) is limited in its capacity to respond and assist victims of crime due to a lack of response vehicles, radios, and other essential equipment. Moreover, corruption is a major problem in the Philippines. According to Transparency International's Global Corruption Index, 69% of Filipinos consider the police either...

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Philippines Crime & Security

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The Philippines poses considerable security threats to international investors, and we hold a generally bearish outlook in regards to criminal, terrorism, and interstate conflict risks.

Petty crimes, particularly those to the person, remain a pertinent issue in the Philippines, affecting both locals and foreign tourists and business travellers. Organised crime is also an issue, with foreign criminal gangs, particularly from China, Hong Kong, and Taiwan, operating in the country. As with most countries of the world, but especially emerging markets, official crime statistics understate the true level of crime. The Philippine National Police (PNP) is limited in its capacity to respond and assist victims of crime due to a lack of response vehicles, radios, and other essential equipment. Moreover, corruption is a major problem in the Philippines. According to Transparency International's Global Corruption Index, 69% of Filipinos consider the...

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Philippines Labour Market

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The Philippines is a country with huge potential to be one of the premier destinations as a market for labour, with a large population and growing pool of educated workers. However, it frequently underperforms the rest of the Asia region across a number of indicators in our Labour Market Risk Index, with competitive labour market countries such as India able to undercut its low minimum wages to attract investors. Overall the Philippines scores a total Labour Market Risk ranking of 47.2 out of 100 in our Labour Market Risk Index.

One area in which The Philippines looks set to perform well is through its high production of English-speaking, science, engineering and ICT graduates, which has resulted in an a boom in companies looking to outsource work to the Philippines, preferring the accent of Filipino-English speakers to that of the Indian accent. Unemployment and underemployment remains high, with a potentially large pool of workers...

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Philippines Logistics

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Two of the worst risks facing incoming businesses are the limited reliability and comparatively high costs for utilities and fuel, and the inadequate and poorly maintained transport networks. However, these risks are mitigated by the comparative ease of trading to and from the Philippines, and the limited costs and bureaucracy which make the country an attractive destination for companies reliant on imports or focused on trade. With an overall score of 55.7 out of 100, placing it in 16th place regionally in our Logistics Risk Index, it is clear that there are a number of detrimental factors increasing the operational risks facing potential investors and businesses considering entering the Philippines.

We believe that with greater reform and investor awareness, the Philippines may fulfil its potential in South East Asia in the near future. Private consumption growth will follow investment growth, resulting in an increase in containerised...

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Philippines Trade & Investment

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BMI believes that there are a number of trade opportunities in the Philippines, but highlight that risks remain fairly pertinent. The country scores 43.7 out of 100 in our Trade And Investment Risk ranking, placing it in 15th position out of its 29 Asian peers. This puts the Philippines just ahead of Vietnam and Kiribati, but behind Fiji and China.

While the Philippines still lags behind its regional peers in terms of foreign direct investment (FDI) inflows, we believe that the country will soon catch up, owing to its strong macroeconomic fundamentals, an ongoing improvement in its business environment, a possible relaxation of its foreign ownership rules which could act as a catalyst, and its increasingly stable political climate.

The country's banking sector outlook is relatively positive, as we expect healthy demand for loans, combined with steady remittance inflows, improving governance, and...

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Philippines Industry Coverage (21)

Agribusiness

Philippines Agribusiness

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BMI View: We hold a positive view on the Philippines' agribusiness sector in the long term, given the potential for expansion into new sectors such as palm oil. Our outlook is especially positive for sugar production, and we also believe the livestock sector will continue to post healthy growth rates. The Philippines' vast consumption market, along with strong government support, will foster domestic and foreign investment and favour output expansion. However, backyard farming and infrastructure problems, especially transport costs, will continue to hamper the sector's growth. This paradox is well illustrated on the island of Mindanao: a recent peace deal between the government and a rebel group could inspire investor confidence, which would help to...

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Autos

Philippines Autos

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We have revised our 2014 and 2015 auto sales growth forecast for the Philippines to 29.4% and 13.3%, up from 21.7% and 9.4% respectively and we believe that the country will continue to see sales for both the passenger car and commercial vehicle (CV) segments surge over the coming quarters. According to the Chamber of Automotive Manufacturers of the Philippines, Inc. (CAMPI), auto sales surged by 32.6% year-on-year (y-o-y) in October to 22,278 units, bringing sales for the first 10 months of 2014 to 192,005 units, representing growth of 29.6% y-o-y.

We believe the passenger car segment will continue to outperform, and for the period January-October, passenger sales grew by 50.3% y-o-y to 74,397 units. Growth for the coming quarters will largely be underpinned by strong private consumption, despite an expected slowdown in GDP growth, as well as a resilient currency unit, which will continue to support auto imports. Given that domestic...

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Commercial Banking

Philippines Commercial Banking

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Commercial Banking Sector Indicators
Date Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits

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Consumer Electronics

Philippines Consumer Electronics

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BMI View: We expect strong sales growth in the Philippine consumer electronics market over the medium term as incomes rise and device prices decline amidst intense vendor competition. We forecast growth of 7.9% in 2015, a slight deceleration from 2014 as the AV segment returns to a lower growth trajectory after TV set upgrade demand brought forward by the FIFA World Cup...

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Defence & Security

Philippines Defence & Security

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BMI View: Rising tensions with China have seen the Philippines significantly increase their defence spending with the aim of revamping their military assets. Relations with China have further deteriorated following territorial disputes in early 2014. In addition, the Southeast Asian country is facing new internal threats such as communist insurgency, Muslim separatists in the south, and terrorist organisations with links to Al-Qaeda and the new Islamic State (IS). These developments have led to an increase in budget allocation towards defence spending by the government, which has seen roughly a 30% rise on the previous year. Potential risks stem from the scaling back of US support for the Philippines counter-terrorism programme.

Relations with China further deteriorated following the Philippines sentencing of 12 Chinese fisherman arrested for illegal fishing in non-disputed waters. Another...

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Food & Drink

Philippines Food & Drink

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BMI View: While the Philippine economy continues to expand at a healthy rate and despite its expanding base of young consumers, we believe that the country offers limited potential in its grocery and food and drink markets. Multinational investment has been slow to penetrate the market, which in itself continues to present numerous challenges to players in the sectors. Issues such as widespread poverty, highly uneven income distribution, under-developed mass grocery retail networks and high levels of unemployment will continue to weigh on the consumer outlook.

Headline Industry Data (local currency)

  • 2014 per capita food consumption = +4.68%; compound annual growth rate (CAGR) forecast 2013 to 2018 = +4.46%

  • 2014 alcoholic drinks value sales = +7.97%; CAGR...

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Freight Transport

Philippines Freight Transport

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While the Philippines will continue to run a trade deficit, sustained robust growth in services exports will allow the country to generate a current account surplus with this growth providing a spur for the country's freight industry. We forecast the country's current account surplus to rise to 3.8% of GDP in 2015 from an estimated 3.7% in 2014.

Although the Philippines freight industry will face headwinds from continued weakness in the Japanese economy (a key trade partner), we nevertheless expect the country's current account position to remain strong in 2015, on the back of a continued surplus in the services category as well as sustained robust growth in overseas workers' remittances. A strong current account position will therefore help to sustain the ongoing improvement in the Philippines' external accounts, which will greatly reduce systemic risk faced by the country.

The...

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Information Technology

Philippines Information Technology

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BMI View: We have a bullish outlook for the development of the Philippines' IT market, and identify it as a regional outperformer over the medium term. The low penetration of products and services creates an opportunity for vendors to target the market as incomes rise and device prices decline, with a fertile environment for a period of robust catch-up growth.

Meanwhile, the booming business process outsourcing (BPO) industry presents a huge opportunity for enterprise sales for hardware and software vendors. Taking the market as a whole, we forecast IT spending growth of 10.6% in 2015, with the market expected to reach a value of almost PHP201bn. Over the medium term emerging technologies will add...

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Infrastructure

Philippines Infrastructure

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  • BMI View: Growth in the Philippines construction sector surged in Q414, with a massive real expansion of 20.5% year-on-year (y-o-y). Reconstruction efforts stemming from the after-effects of Typhoon Yolanda in late 2013 should continue to provide a strong tailwind for construction activity throughout 2015 and we forecast the sector will experience real growth of 9.4%.

Key Trends And...

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Insurance

Philippines Insurance

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BMI View: The Philippines insurance market is one of the fastest growing in the Asia-Pacific region as a rapidly expanding middle class and the increased presence of multi-national firms sees coverage expand rapidly to new regions and areas of the population. The life insurance segment remains the clear outperformer with premiums growing at double-digit rates, though the non-life segment, despite significant challenges, is not far behind. The level of penetration of insurance coverage remains relatively low throughout the Philippines, with the potential for growth to continue at its current rate over the next two decades.

2015 will see the Philippines life insurance sector continue to outperform the non-life market in terms of premium growth as insurers, particularly multi-nationals, step up their distribution efforts and expand coverage to communities outside of the...

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Medical Devices

Philippines Medical Devices

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BMI Industry View: An above average market growth rate of 9.7% is projected for the Philippine medical device market and much of this demand will continue to be met by imports. Demand continues to vary by region, with the capital and surrounding areas continuing to provide the best prospects for growth.

Headline Industry Forecasts

  • The Philippines medical device market is expected to grow at a solid 9.7% in the medium term. This growth will be spearheaded by the growth of imports, health expenditure, the private sector and medical tourism.

  • In US dollar terms, annual imports grew by 7.1% to reach USD243.9mn in 2013. Imports grew every year during the 2009-2013 period, with growth ranging from 25.0% in 2009 to...

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Mining

Philippines Mining

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BMI View: The mid-2014 exit of Glencore Xstrata from the USD5.9bn Tampakan copper-gold project reflects continuing challenges for mining investment in the Philippines, largely due to subdued metal prices. Moreover, resource nationalism will remain a threat as the Philippine government continues to consider raising taxes on the mining sector.

Falling metal prices and fading attraction of frontier mining will continue to dampen investment into the Philippines' mining space over the coming years. As spotlighted by the exit of Glencore Xstrata from the USD5.9bn Tampakan project in South Cotabato, which announced its decision to...

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Oil & Gas

Philippines Oil & Gas

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BMI View: The Philippines will likely remain a small producer of both oil and gas over our forecast period. Faster consumption growth than output increases will see the Philippines remain a net importer of crude oil and oil products, as well as joining the ranks of gas importers in the world.

The main trends and developments we highlight for the Philippines' oil and gas sector are:

  • We forecast relatively stagnant growth in the Philippines' oil and gas reserves, owing to the limited number of discoveries made.

  • Crude oil production will see small increases throughout most of our forecast period to 2024. We note significant downside risk to our forecast particularly from 2019, as these are based on projects where final investment decisions have not been made.

    ...

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Petrochemicals

Philippines Petrochemicals

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The Philippines petrochemicals industry fell behind overall manufacturing growth in 2014, but is expected to recover in 2015 as the automotive and construction sectors post stronger growth rates and local producer JG Summit Petrochemicals Corporation (JGSPC) ramps up capacity utilisation at its new cracker complex, according to BMI's latest Philippines Petrochemicals Report.

In the first nine months of 2014, the value of chemicals output fell 16.8%, while plastic fell 4.5% and rubber grew 17.7%. Although performance was expected to improve as a result of JGSPC's expansion, the company's new cracker with 320,000tpa ethylene and 190,000tpa propylene capacities struggled to come into operation.

Operations were temporarily halted in mid-June 2014 when the facility broke down leading to a big fire. The company was on the third phase of its plant commissioning when the accident...

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Pharmaceuticals & Healthcare

Philippines Pharmaceuticals & Healthcare

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BMI View: Our outlook for the Philippines' pharmaceutical sector remains bullish, driven by an increasing population and high burden of disease profile. Generic medicines will continue to account for an increasing share of pharmaceutical sales in the Philippines, galvanised by expanding government provision of healthcare as well as improvements in generic drug distribution. This provides strong growth opportunities for generic drug manufacturers in an emerging market where economic growth will be sustained by robust private consumption. However, current access to medicines and treatment will continue to negatively impact the wider market.

Headline Expenditure Projections

    ...

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Power

Philippines Power

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BMI View: We expect to see robust growth in the power sector in the Philippines, with total generation expected to expand by an average by 4.3% during out ten-year forecast period until 2023. With recovery from the 2013 typhoon gathering pace, good domestic economic growth and a range of new projects being announced, overall the future is looking positive for the Philippines power market.

Notwithstanding the adverse effects that linger from Typhoon Haiayn that struck the Philippines in late 2013, we still expect to see growth in the longer term, with a range of projects including coal-fired plants and various renewable energy projects lending weight to higher growth forecasts. We expect total electricity generation growth of 3....

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Real Estate

Philippines Real Estate

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BMI View: Ongoing improvements in the Philippine's economy have been supported by the rapidly expanding business process outsourcing (BPO) industry, which is helping boost demand for commercial real estate across the country. We see particular opportunities for investors in the office market due to the strength of the BPO industry, as well as retail developers looking to benefit from the country's increasing levels of private consumption.

Despite remaining underdeveloped when compared to Thailand and Malaysia, the Philippines' commercial real estate industry has achieved continued growth thanks largely to business process outsourcing (BPO) which is fuelling a rapid expansion in the services sector. The success of this industry will significantly influence the overall strength of the office real...

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Renewables

Philippines Renewables

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BMI View :   Energy demands in the Philippines continue to grow, and the country now faces a potential shortfall in energy supply in the summer of 2015. The government is keen to reduce its reliance on expensive fuel imports and develop domestic production capacity in order to lessen the cost burden of electricity and avoid the threat of rolling blackouts. This has resulted in a range of new projects arriving in the pipeline, however, it remains to be seen if the measures will be sufficient to avoid power cuts.

The government of the Philippines set ambitious renewable energy targets under the Renewable Energy Act of 2008 and the...

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Retail

Philippines Retail

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BMI View: The Philippines has experienced resilient economic growth and this has helped elevate disposable incomes across the country. As a result, urban dwellers are becoming increasingly affluent and we expect rising household spending levels, particularly on non-essential luxury items. We also expect to see the expansion of 24-hour convenience store retailers, and the expansion of modern, high-end shopping mall formats in the largest cities.

Owing to a favourable economic environment over recent years, the Philippines have managed to elevate a large number of its population out of poverty while increasing overall disposable household incomes, particularly in urban areas. These economic improvements, as well as a relatively...

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Shipping

Philippines Shipping

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Manila International Container Terminal (MICT), the Philippines' top container facility in terms of box throughput, is set to continue holding this position in the country's maritime sector in 2015, with BMI forecasting further steady growth over the course of the year.

Freight volumes at the port of Cebu, one of the country's largest facilities in terms of total throughput handled, are also expected to increase.

Over the medium term, growth will continue at a steady rate at both MICT and the port of Cebu.

Headline Industry Data

  • 2015 port of Cebu tonnage throughput forecast to grow 4%, while over the medium term we project a 22% increase.

  • 2015 MICT container throughput forecast to grow 4%, while over the medium term we project an 18% increase.

  • ...

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Telecommunications

Philippines Telecommunications

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BMI View : Relatively low penetration and increasing GDP per capita will give impetus for mobile market growth in the Philippines. BMI believes that mobile growth will average 3.5% over 2015-2018. A new entrant - media conglomerate ABS-CBN Corporation - launched its mobile virtual network operator (MVNO) service under the ABS-CBNmobile brand in December 2013 using the network infrastructure of Globe Telecom. Despite the new competition, BMI believes market dynamics are likely to remain in favour of the incumbents, Philippine Long Distance...

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