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.

Philippines Country Risk

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Core Views

  • The Philippine economy surged forward with 7.0% y-o-y real GDP growth in Q216, and we expect the archipelago's outperformance to continue over the coming quarters on the back of a solid government policy agenda, and ongoing booms in the construction and services sectors.

  • We maintain our forecast for the BSP to hold its benchmark RRP facility rate at 3.00% in Q416 and Q117 as the Philippines will likely continue to enjoy favourable growth and inflation dynamics in the coming months. However, we note that the inflation cycle has likely turned, and risks are tilted to the upside going into 2017.

  • We expect the Philippine peso to weaken further against the US dollar in the coming months due to market uncertainty over Duterte's increasingly unorthodox policies. Over the longer term, we hold a slight appreciatory bias on...

Philippines Operational Risk Coverage (9)

Philippines Operational Risk

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BMI View: The geographic composition of the Philippines as a country comprising a range of islands across a large area, offers both considerable logistics difficulties, as well as some advantages, for investors. On the one hand, transport and utilities networks are disjointed and vary island by island, and generally require considerable investment in order to meet the needs of supply chains and industries. On the other hand, reliance on maritime trade has resulted in the development of excellent connections to global trade routes, which significantly reduces lead times and costs for exporters and importers. However, port congestion remains a major concern, and we highlight that inadequacies in the internal logistics network, which are exacerbated by extreme weather events, continue to pose risks to supply chains and business...

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...

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 available...

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 goods...

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...

Philippines Industry Coverage (23)

Philippines Agribusiness

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BMI View: We hold a positive view on the Philippines' agribusiness sector in the long term, given the country's potential for expansion into new sectors, such as palm oil. We particularly like the outlook for sugar mills and believe the livestock sector will continue to show healthy growth rates. The Philippines' vast consumption market along with some 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. These...

Philippines Autos

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BMI View: Robust private consumption and a booming construction sector will translate into growing demand for both passenger vehicles and commercial vehicles. We therefore forecast growth of 23.6% in vehicle sales in 2016, reaching 356,758 units sold by year end.

Strong Growth Momentum to Continue
Philippines - Vehicle Sales By Segment, Units
f = BMI forecast. Source: AAF, BMI

Key Views

  • Robust...

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

Philippines Consumer Electronics

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BMI View: We adopted a less bullish outlook for consumer electronics device sales growth in the Philippines throughout the medium term in the Q4 update. This change relies on two factors: a more negative outlook for tablet sales in the face of competition from smartphone - particularly phablets; and the value squeeze in the handset segment where vendor competition has resulted in steep declines in average selling prices. Despite the downward revision we still have a broadly positive outlook for device sales as incomes rise and forecast value growth at a CAGR of 3.1% throughout 2016-2020.


Philippines Defence & Security

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BMI View: Rising tensions with China have seen the Philippines significantly increase 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 by insurgent groups, especially Abu Sayyaf. These developments will therefore drive an increase in budget allocation towards defence spending by the government, which will reach USD3.4bn in 2015. The lack of a clear strategic defence spending policy, however, and the under-developed domestic defence manufacturing sector, will open up opportunities for international companies but limit them within the country.

The Philippines...

Philippines Food & Drink

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BMI View: Sustained private consumption growth, combined with a young and sizeable consumer base, will drive sales of food and drink throughout our forecast period to 2019. Nonetheless, operational challenges, combined with the huge dominance of San Miguel Corporation, continue to hold back foreign investment, thereby hampering sector dynamism.

Headline Industry Data (local currency)

  • 2015 food consumption (local currency) growth: +4.9%; compound annual growth rate (CAGR), 2014 to 2019 = +5.8%.

  • 2015 alcoholic drinks sales (local currency) growth = +5.8%; CAGR to 2019= +6.5%.

  • 2015 soft drinks sales (local currency) growth = +8.6%; CAGR to 2019 = +7.7%.

  • 2015 mass grocery retail sales (local currency) growth = +6.6%; CAGR to 2019 = +6.5...

Philippines Freight Transport

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BMI View: Overall, 2016 will be a year of mixed growth across the Philippine freight transport industry, with air freight set for a robust expansion, while road haulage will be more sedate. External headwinds will weigh on exports, but strong domestic demand and investment should support continued volume growth.

The outlook for the Philippines' trade remains mixed, in large part due to a sedate regional environment which is impacting upon demand from the country's major neighbouring trade partners. Deteriorating regional demand conditions will weigh on export performance in the Philippines, acting as a drag on the Philippine economy and adding downside pressure on the peso. Mounting concerns over the Chinese economy following the People's Bank of China (PBOC)'s cumulative...

Philippines Freight Transport

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BMI View: Our anticipation that the Philippines will enjoy healthy real GDP growth over the coming years underpins our expectation of positive real and nominal growth in trade in the Asian country, bolstering the freight transport sector. However, given ongoing weakness in regional trade partners China and Japan, we expect that the Philippines will see imports perform more strongly than exports, with implications for the country's freight transport sector and the companies operating therein.

Key BMI Forecasts

  • The road freight sector in the Philippines will see growth moderate over the remainder of our forecast period to 2020, following an extraordinary double-digit expansion in 2015. Growth will be driven primarily by imports, particularly those related to infrastructure projects in the country as capital formation enjoys strong...

Philippines Information Technology

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BMI View: We hold positive medium-term outlook for the Philippines' IT market, which has strong domestic economic momentum that is relatively insulated from China and commodity market risks that could potentially drive outperformance. Rising incomes will benefit the PC market, but we adopted a more cautious outlook this quarter due to potential for smartphones to cannibalise spending. The enterprise software and services outlook remains very strong, and will be the main driver of an IT market spending CAGR of 8.1% throughout 2016-2020.


Philippines Infrastructure

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BMI View: The outlook for Philippines' construction sector remains positive, supported by President Rodrigo Duterte's plans to boost infrastructure, accelerate PPP projects and develop the countryside.

Latest Updates And Structural Trends

  • Our outlook for Philippines' construction industry remains positive and we forecast real growth of 7.5% and 8.9% in 2016 and 2017 respectively, and an annual average growth of 8% over our ten-year forecast period to 2025.

  • President Rodrigo Duterte's announcement his administration would honour existing government contracts and projects awaiting implementation and speed up the roll-out of projects under the PPP programme by streamlining the procurement system...

Philippines Insurance

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BMI View: We remain upbeat about the prospects for the Philippines' insurance sector. Both major segments should benefit from the steady rises in household income and economic activity generally. In both cases, premiums will be boosted by the development and distribution of innovative products. This quarter we are revising our projections for the life segment upwards, to take account of the strong (and likely persistent) demand for variable life products. In the non-life segment, we have taken a significantly more conservative view of the prospects for property insurance. Nevertheless, we remain confident that the non-life segment as a whole will achieve solid growth through the forecast period.

Headline Insurance Forecasts (Philippines 2013-2020)
2013 ...

Philippines Medical Devices

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BMI View: We expect the Philippines medical device market to achieve a solid 8% growth per annum to 2019 with modernisation projects for hospitals and other healthcare facilities being the key driver of growth. Much of this demand will continue to be met by imports and it is worth noting that these will continue to vary by region, with the capital and surrounding areas still providing the best prospects for growth.

Projected Medical Device Market, 2014-2019
Total (USDmn) Per Capita (USD) Total (Local Currency mn)

Philippines Mining

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BMI View: Mining output in the Philippines will continue to be severely affected by softening of Chinese demand for key mined metals, including nickel, copper and gold. Weakness in global prices for these minerals will deter investment in Philippines mining in the short-term; however, we maintain that the industry is well positioned for longer term growth as foreign miners look to take advantage of the country's sizeable and relatively untapped deposits, as well as low operating costs.

2015e 2016f

Philippines Oil & Gas

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BMI View: The Philippines will become increasingly dependent on energy imports over the next 10 years as falling domestic crude oil and natural gas production prove inadequate to offset rising demand. Significant new plays to replace Malampaya gas field does not seem likely because of the current slowdown in upstream activities and lingering tensions in prospective areas in the South China Sea.

Headline Forecasts (Philippines 2014-2020)
2014e 2015e 2016f ...

Philippines Petrochemicals

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Basic chemicals output reported strong growth in 2015 as a result of increasing output at JG Summit Petrochemicals Corporation's new cracker complex. Although plastic and rubber also reported increases in output volumes, this did not raise the value of production, as lower naphtha prices were transferred through the product chain in a saturated market.

In the first nine months of 2015, the value of basic chemicals output soared 44.7% as production grew at the Philippines' new cracker, which has capacities of 320,000 tonnes per annum (tpa) of ethylene, 189,000tpa propylene, 218,000tpa of pyrolysis (biomass) gasoline, 150,000tpa of fuel gas and 28,000tpa of fuel oil. The cracker unit is feeding a 185,000tpa polypropylene plant and a 300,000tpa polyethylene plant.

The Bataan Refinery upgrade 2 project also came into full operation in Q215 with a new fluid catalytic cracker unit,...

Philippines Pharmaceuticals & Healthcare

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BMI View: There will be broad healthcare policy continuity in the Philippines under President Rodrigo Duterte. In contrast to his other more controversial positions, Duterte's statements on healthcare are relatively more nuanced and in line with current policy directions. The appointment of Jean Paulyn Rusell-Ubial, an experienced official from the Department of Health, as health secretary will serve to further maintain the status quo. Risks to multinational drugmakers from Duterte's presidency lie instead in his management of the economy, as out-of-pocket payments are a dominant source of healthcare financing in the Philippines.

Headline Expenditure Projections

  • Pharmaceuticals: PHP150.44bn (USD3.33bn) in 2015, rising to PHP156.19bn (USD3.26bn) in 2016; +3.8% in local currency terms and -2.1% in US...

Philippines Power

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BMI View: We expect robust growth in the power sector in the Philippines, with total generation expected to expand by an average of 4.8% during our 10-year forecast period to 2025. With recovery from the 2013 typhoon gathering pace, reasonable domestic economic growth and a range of new projects being announced, overall the future is looking positive for the Philippine power market.

Headline Power Forecasts (Philippines 2015-2021)

Philippines Real Estate

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BMI View : The Philippine economy has remained resilient in the face of the Chinese economic slowdown and falling global demand. Strong local consumption, supported by rising employment and incomes, ensures that the economy remains on a growth trajectory and that the outlook for commercial real estate remains bright. In particular, the office and retail segments should provide opportunities for new players.

We forecast real GDP growth of 6% in 2016, up from 5.7% 2015, amid higher government spending that will spur activity in the private sector. The economy also benefits from remittances from Filipinos working overseas and the thriving local business process outsourcing (BPO) industry. However, external challenges come from the slowing Chinese economy, a looming rise in interest rates, the stronger US dollar and weaker Chinese yuan, which will dampen investor appetite....

Philippines Renewables

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BMI View: Renewable energy continues to be a key strategy in the government's fight against climate change. As one of the five major investors in geothermal energy, we believe this sector to be largely saturated providing strong investment potentials elsewhere, particularly in the wind and solar segments, backed up by governmental FiT programmes. We therefore expect these two sectors to carry the bulk of non-hydro renewable growth in our forecast up until 2024. Forecast expansion rates are, however, undermined by several obstacles related to an inadequate national grid, a volatile-business environment and a strong market dynamic for cheaper coal power paired with high electricity prices that have led to a lack in political commitment to follow through on ambitious renewables targets.

Renewables Headline Forecasts (Philippines 2014-2020)...

Philippines Retail

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BMI View: Growth in the Philippines' retail market will be supported by rising wages and disposable incomes, with a young urban population keen to make aspirational purchases. We expect significant opportunities for expansion and new market entrants in urban areas, as lifestyles become more aspirational. However, opportunities diverge markedly between urban and rural areas. The overall low urbanisation rate, the country's geography and the relatively low incomes of rural dwellers mean that opportunities to expand outside the cities will remain limited.

Headline Household Spending

Philippines Shipping

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BMI View: We anticipate 2016 to be a good year for the Philippines' port sector, with growth to further build up from positive 2015 figures. Economic development and regional trade expansion are increasing trade volumes. Meanwhile, infrastructure investment has temporarily resolved congestion issues and planned projects will provide further accommodation for rising throughput over the medium term. Also contributing to our positive outlook, the Cabotage Act signed in 2015 lowers entry barriers for foreign shipowners, boosting shipping activity in the country.

Over 2016-2019 ...

Philippines Telecommunications

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BMI View : Globe Telecom has made a series of content investments including new partnerships with international content providers and the establishment of two new units to produce original content. Its original video content will help the operator boost mobile data revenues and safeguard revenue erosion from third-party over-the-top (OTT) video providers. However, PLDT's dominance in the wireline broadband market and the Philippines's notoriously slow internet speeds will mean that leveraging more established regional OTT partners for content distribution, rather than depending wholly on its local market, will be crucial for returns in the short-term.

Network Enhancement Will Expedite Mobile Data Adoption
Philippines Mobile Market Forecasts (2014-2020)

Philippines Tourism

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BMI View: The outlook for the Philippines' burgeoning tourism industry is broadly positive at present. While the market has a long way to go to catch up with established regional destinations such as Thailand and Indonesia, the Philippines is attracting a growing volume of international visitors and this is boosting tourism-related spending and hotel industry value. The government is highly supportive of the tourism sector and is investing in wide-reaching marketing campaigns, and reducing barriers to entry to encourage further growth. That being said, growth is reliant upon a stable and secure environment and an escalation in political rhetoric and extremist violence could derail the currently positive outlook.

Key Forecasts (Philippines 2013-2020)...

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