As Asia’s economic giants China and India experience a slowdown, analysts recommend looking at a smaller regional player, which has been delivering on its growth promises.
The Philippines, Southeast Asia’s services-driven economy, expanded by a faster-than-expected 5.9 percent year on year in the second quarter, which takes its first half 2012 GDP growth to 6.1 percent, prompting Barclays Regional Economist Prakriti Sofat to call the country Asia’s “rising star.”
She expects full year growth to exceed the bank’s target of 5.5 percent, and adds that a credit ratings upgrade is also on the cards in the second half of 2013.
“After Indonesia received investment grade ratings, the market’s focus turned to the Philippines as the next potential candidate in Asia,” Sofat wrote in a note.
Increasing foreign direct investment (FDI) in the country, structural improvements - such as the passage of an anti-money laundering bill – and rising political stability will all strengthen the Philippines case to move to an investment grade, says Sofat.
The optimism surrounding the country is evident from the performance of its stock market, which has risen a whopping 18 percent so far this year, driven by an increase in foreign buying.
Medha Samant, Investment Director at Fidelity Worldwide Investment identifies the Philippines as the “new market darling” for foreign investors pointing to the country’s reduced fiscal deficit, strong domestic demand, and high overseas foreign worker remittances.
Personal remittances from overseas Filipinos rose by 5.1 percent to $10.1 billion during the first six months of the year, compared to the same period in 2011.
“Overseas Filipinos are increasing the pace by which they are sending money home, continuing to support the consumption-driven economy,” Trinh Nguyen, Economist at HSBC, wrote.
In addition to money from overseas citizens fueling the domestic market, the country’s booming outsourcing sector – supported by the country’s vast English speaking population – is helping to strengthen the already robust consumption base.
“The Phillippines BPO (Business Processes Outsourcing) sector employs almost the same number as bank workers today…there are opportunities in this market that we are quite excited about,” Medha said.
Last year, the Philippines overtook India as the world’s biggest call center hub, with $7.6 billion in voice service exports, compared to India’s $7 billion, according to U.S.-based research firm Everest Group.