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 Philippines' real GDP growth slowed to 5.2% year-on-year (y-o-y) in Q115 from 6.6% in Q414, owing largely to export weakness, we nevertheless expect strong domestic demand to provide a measure of support for the economy. As such, we maintain our forecast for the country's real GDP growth to come in at a strong 6.0% in 2015. That said, a larger-than-anticipated slowdown in exports would pose a downside risk to our forecast.

*The Philippines' ongoing growth-inflation sweet spot informs our forecast for the Bangko Sentral ng Pilipinas (BSP) to keep its benchmark interest rate unchanged at 4.00% in 2015. In combination with positive real interest rates, we forecast the Philippine peso to remain resilient against the US dollar. Meanwhile, yields will remain anchored amid a benign inflationary environment.

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Philippines Operational Risk Coverage (9)

Philippines Operational Risk

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BMI View: There are a number of attractive investment opportunities in the Philippines, but we highlight that risks to incoming businesses remain pertinent. Among the main concerns are low foreign direct investment (FDI) flows, an overreliance on imported goods and an increasingly dominant manufacturing sector, which leaves the economy exposed to the global economic outlook. Moreover, high levels of corruption and a lack of transparency in the judiciary pose risks to investors in the form of increasing costs and lack of objectivity for settling commercial disputes. Consequently, the Philippines scores 48.4...

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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 available...

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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 goods...

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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 (22)

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 country's potential for new sectors expansion, such as palm oil. We particularly like the outlook for sugar production and believe the livestock sector will continue to show 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. These inefficiencies will become increasingly crippling as South East Asia moves towards the ASEAN Economic Community, which is supposed to lead to trade and investment liberali...

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Autos

Philippines Autos

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Sales

Based on latest sales figures from the Chamber of Automotive Manufacturers of the Philippines Inc. (CAMPI) and the Truck Manufacturers Association (TMA), auto sales in the Philippines rose 18.1% year-on-year (y-o-y) in May 2015, to 23,139 units. This brought auto sales for the first five months of the year to 107,280 units, an increase of 20.1% y-o-y. We forecast full-year sales growth forecast of 13.2% as high base effects will temper growth slight in the coming months.

The country's consumer story continues to grow from strength to strength. According to the CAMPI President Rommel Gutierrez, the consistent growth in sales is largely due to attractive and flexible financing options and new models introduced by several brands. With our Country Risk team forecasting the central bank policy rate to remain at 4.0% in 2015 and only rise by 25 basis points in 2016, affordable credit...

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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 6.8% in 2015, a deceleration from 2014 as depreciation of the peso against the US dollar exerts a slight squeeze on household purchasing power in global markets. The medium term outlook is strong, with broad based economic growth,...

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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 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...

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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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BMI View: Overall, 2015 will be a year of average growth for the Philippine freight industry. We expect the road, rail and air freight sector to grow by 2.6%, 6.5% and 6.1% respectively. Strong consumer demand and the boom in the construction sector mitigate weak export performance. Looking ahead, we expect the rail sector to grow in importance.

While the Philippines' real GDP growth slowed to 5.2% year-on-year (y-o-y) in Q115 from 6.6% in Q414, owing largely to weaknesses in exports, we nevertheless expect strong domestic demand to provide a measure of support for the economy. As such, we maintain our forecast for the country's real GDP growth to come in at a strong 6.0% in...

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Information Technology

Philippines Information Technology

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BMI View: A small upgrade to the growth outlook in the Q415 update has reinforced our view that the Philippines IT market is set to be a regional outperformer - alongside other frontier Asia Pacific markets such as Vietnam and Indonesia - over the medium term. The key to our positive outlook is the convergence of broad based economic growth; ie, strong wage growth across most of the populace, low device penetration rates and increasing enterprise confidence and modernisation momentum. We believe this low-hanging fruit will enable a spell of strong 'catch-up' growth to encompass the IT...

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Infrastructure

Philippines Infrastructure

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BMI View: Strong growth in the Philippines' construction sector will be supported by the private sector, with residential building activity supported by a relatively stable monetary policy. Public construction will also pick up as Aquino Benigno looks to accelerate projects under the public-private partnership programme before ending his single-term as president in 2016.

Key Trends And Developments

  • We expect the Philippines' construction sector to register double-digit real growth in 2015, expanding 10.9% in 2015, with growth largely underpinned by the private sector. The residential building boom continues to lift construction activity, while the government maintains a relatively stable monetary policy.

  • Public construction would also be supported by an acceleration...

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Insurance

Philippines Insurance

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BMI View: By various metrics, the Philippines' insurance sector is under-developed. It will remain so in 2019. Nevertheless, the trends are positive. In the life segment, increasing numbers of households and companies are becoming able to afford the wealth and protection offerings of the life insurers. This is partly due to rising incomes and partly due to initiatives on the part of the insurers themselves to educate potential clients. In the non-life segment, premiums should rise as a result of the growth of the economy and, in motor and property insurance, higher prices. There is no reason why premiums cannot continue to expand strongly beyond the end of the forecast period.

At first glance, many of the key metrics of the Philippines' insurance sector are very uninspiring. Life insurance premiums are, in 2015, equivalent to just...

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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 2.0%...

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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 sell its...

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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.

Headline Forecasts (Philippines 2013-2019)
2013 2014e 2015f 2016f ...

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Petrochemicals

Philippines Petrochemicals

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There were mixed results in the Philippines petrochemicals industry with plastic output continuing to contract. Problems associated with the start-up of new plants have not helped matters, but BMI's latest Philippines Petrochemicals Report envisages strengthening performance in 2015 as JG Summit Petrochemicals Corporation (JGSPC) ramps up capacity utilisation at its new cracker complex and economic prospects improve.

In Q115, the value of production index (VaPI) for chemicals and rubber improved following a poor performance in 2014 with growth of 41.7% and 12.8% year-on-year (y-o-y). However, plastic fell by an average of 6.8% y-o-y in Q115. Production was lower than expected due to problems bringing into operation JGSPC's complex with 320,000tpa ethylene and 190,000tpa propylene. Operations were temporarily halted in mid-June 2014 when the facility broke down leading to a big...

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Pharmaceuticals & Healthcare

Philippines Pharmaceuticals & Healthcare

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BMI View: The proposed 2016 government budget will be positive for the Philippines healthcare sector. The budget proposes a significant increase in funds allocated to the Department of Health which will enable authorities to finance the expansion of the country's health insurance scheme and upgrade medical facilities in the country. These two thrusts collectively address some of the key impediments to healthcare access in the Philippines and will reinforce commercial opportunities for pharmaceutical companies operating in the country. However, further price caps on high-value medicines and poor intellectual property protection continue to pose a substantial risk for multinational drugmakers.

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 4.9% during our 10-year forecast period to 2024. 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.

Notwithstanding the adverse effects that linger from Typhoon Haiyan that struck the Philippines in late 2013, we still expect to see growth in the...

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Real Estate

Philippines Real Estate

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BMI View: : Developments in the Business Processing Industry (BPO) and contributions from Overseas Filipino Workers (OFW) remittances will maintain the view of a strong peripheral economy in the Philippines, ensuring the commercial real estate industry remains resilient, with particular opportunities looking to arise in the retail and office sub-sectors, despite laggards from weakening economic dynamics.

After nominal growth of 20% in 2012, the BPO industry of the Philippines is estimated to gross revenues of upwards to USD25bn by 2016. According to these figures, the Philippines' BPO industry will account for approximately 10% of the nation's GDP. Surpassing India as the largest BPO industry in the world (as of 2010), considered as location of choice for subsequent investment owing to...

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Renewables

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 sectors, backed up by solid governmental FiT programmes. We therefore expect these two sectors to carry the bulk of non-hydro renewable growth in our forecast up until 2024. While both sectors are estimated to see strong growth in 2015 and going into 2016, forecast expansion rates are undermined by several obstacles related to an inadequate national grid, a volatile-...

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Retail

Philippines Retail

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BMI View: Robust economic growth will continue to support employment levels in the Philippine which, together with the rising amount of households, will lead to greater spending. While essential goods will continue to account for the lion's share of household spending, aspirational goods will become increasingly important on the back of rising affluence levels. Meanwhile, geographic fragmentation, large rural population and poor quality of transport infrastructure remain the main challenges for retailers operating in the country.

We retain our positive outlook for the Philippines' economy, with real GDP growth forecasted at 6.0% in both 2015 and 2016, which will increase employment and disposable incomes. However, a large part of the country's population remains employed in low-wage jobs in the agricultural and industrial sectors and will continue to be reliant on remittance inflows from...

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Shipping

Philippines Shipping

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BMI View: The congestion issues that plagued the Philippines port sector in 2014 and led to a decrease in throughput at the country's largest container facility the Manila International Container Terminal appear to be resolved, with box growth at the facility up 7.5% y-o-y in Q115. Congestion will however remain a worry for the Philippine port sector over the medium term and only expansion projects will bring a resolution to a problem, which could threaten to derail the country's plans to boost its role in the global shipping sector.

Headline Industry Data

  • 2015 port of Cebu tonnage throughput forecast to grow 6%, over the medium term we project a 24% increase.

  • 2015 MICT container throughput forecast to grow 6.6%, over the medium term we project a 40% increase.

  • ...

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Telecommunications

Philippines Telecommunications

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BMI View: Relatively low smartphone penetration and increasing GDP per capita will give impetus for mobile market growth in the Philippines. BMI believes that 3G subscriptions will grow at an average rate of 4.2% over our forecast period from 2015 to 2019. A potential new entrant in the form of San Miguel Corp (SMC)'s Bell Telecommunications (BellTel) unit could drive competition in the currently duopolistic market. If its commercial launch is successful, incumbents Globe Telecom and Philippines Long Distance Telephone (PLDT) could have their market positions threatened. Despite this, BMI believes that the two established operators...

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Tourism

Philippines Tourism

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BMI View: The tourism market in the Philippines is one of the fastest growing in the competitive Asia Pacific region. The BMI Tourism report looks at a range of key indicators in this emerging market, including the expected growth in inbound and outbound travel and the impact this will have on tourism related expenditure and industry value. With visitor numbers set to increase substantially over the forecast period to 2019, we expect to see a range of investors take advantage of the growth potential on offer in this increasingly popular holiday destination.

The Philippines has a lot to offer potential visitors. The country has one of the longest coastlines in the world and is growing in popularity as a diving destination. The range of attractions on offer is diverse, with a number of natural parks, nature reserves and important cultural/historical...

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