‘Philippines set to become top performer in Asean’

MANILA, Philippines — The Philippines will soon emerge as the top economic performer in the Association of Southeast Asian Nations (ASEAN),  thanks to reforms that have strengthened the country’s global trade position and growth potential, according to HSBC Global Research.

HSBC economist for ASEAN Aris Dacanay said reforms in the Philippines have made the country more influential in the global economy as its share to global trade has risen by 0.11 percentage points since 2018, the second highest in the region.

“In the next five years, we believe that the Philippines could become ASEAN’s leading performer. Growth was averaging 6.5 percent prior to the COVID  pandemic,” Dacanay said.

“In 2025 and 2026, we expect that the Philippines will be the second fastest growing economy in ASEAN behind Vietnam and the third fastest in Asia,” he added.

Dacanay cited the International Monetary Fund’s latest World Economic Outlook, in which the IMF projects the Philippines becoming the 28th largest economy by 2029, an improvement from the 33rd rank today.

If realized, the five-place jump will represent the most significant ranking improvement among ASEAN economies.

The Philippine economy posted a growth of 6.3 percent in the second quarter, up from 4.3 percent a year ago and the revised 5.8 percent growth in the first quarter of 2024. In the first half, growth averaged six percent.

According to Dacanay, the country embarked on a series of fiscal, structural and institutional reforms over the past two decades.

“From liberalization, fiscal and institutional reform, we think the Philippines has one of the strongest reform narratives in ASEAN, giving the economy the stability it needs for take-off,” he said.

He noted that successive administrations have contributed to building this foundation, including the Macapagal administrations fiscal reforms and trade agreements, the Aquino administrations Sin Tax Law and institutional improvements, Dutertes focus on fiscal and infrastructure advancements as well as ongoing liberalization and fiscal reforms under the current administration.

The key reforms to monitor in the next five years should be the tax reform on passive income and financial instruments as well as the rationalization of Military and Uniformed Personnel pensions.

“These reforms should help bolster the economys fiscal coffers further, accelerating the countrys fiscal consolidation efforts while generating resources needed for further growth, Dacanay said.

The HSBC economist also sees numerous opportunities for investment in the country as economic demand grows.

He said the incremental increase in demand in the economy is expected to average $45 billion annually from 2024 to 2029, marking the second highest in ASEAN.

This shows that investors have a significant demand to cater to and work with.

But despite the optimistic outlook for demand, Dacanay said the Philippines is one of the least leveraged in ASEAN, with bank credit to the private sector at just 69 percent of gross domestic product.

“We think this implies that there is significant potential opportunity for investors and entrepreneurs to participate in the Philippines’ robust growth narrative,” he said.