By Bernie Cahiles-Magkilat
Despite a 9-percentage point slippage in the past 12 months, business optimism in the Philippines still remained highest among 35 economies surveyed, according Grant Thornton’s International Business Report.
In addition, 48.6 percent of respondents have seen their revenue grow by more than 5 percent in the previous year. The continuation of this trend reflects the business community’s view of the Philippines as a strategic growth market. Other Asian economies that rank high in business optimism include Vietnam, Indonesia, and India.
However, the recent IBR report showed that while a net 73 percent are optimistic about the outlook for the Philippine economy over the next 12 months, optimism has gone down by 9 percentage points compared to the same period last year. In contrast, a net 45 percent of Southeast Asian companies surveyed are optimistic about the ASEAN economy.
A net 77 percent anticipate an increase in profitability, although the profitability expectations of the mid-market have gone down by 3 percentage points in comparison to the same period last year. The expectations are well above the net 50 percent of mid-market companies across ASEAN that hope to see an increase in the profitability of their businesses.
Statistics from Grant Thornton’s International Business Report further indicate that a net 66 percent of Filipino mid-market companies expect an increase in revenue in the next 12 months. Though revenue expectations have slightly dropped by 4 percentage points compared to the same period last year, it is still higher than the average for the ASEAN trade bloc at net 59%.
“The Philippines is one of the fastest-growing countries in the emerging markets. It is expected to grow by about 6 to 7 percent in 10 years,” shared Marivic Españo, Chairperson and CEO of P&A Grant Thornton, the Philippine member firm of Grant Thornton International Ltd. “The market’s expectations for the Philippine economy are very encouraging,” she adds.
According to a separate report from Grant Thornton International, the Philippine economy is forecast to grow to $434 billion by 2023, up from $331 billion in 2018. The compound annual growth rate of 5.35% is higher than the growth rate for Southeast Asia as a whole.
One of the big drivers of growth is the digital economy, which is forecast to grow from US$5 billion today to US$21 billion by 2025. Although automation in manufacturing and services is expected to see a reduction of 1.5 million job over the next five years, the job losses will be more than made up by the Philippine government’s US$180-billion “Build, Build, Build” infrastructure development program. The construction of more highways, airports, bridges, and ports is expected to add USD 2.47 trillion to the Philippine economy and employ 7 million people by 2030. Other sectors seeing strong growth include real estate, banking and finance, entertainment and tourism, and outsourcing.
Across so many different areas, the Philippines provides a growing number of business opportunities. “We are serious about making sure that we provide the right infrastructure and the right services to support the growing economy,” said Españo.
“54 percent of mid-market companies surveyed intend to expand their business domestically,” Españo noteD. Over the year, survey respondents anticipate an increase in selling prices. They also expect to send substantially more exports, employ more people, invest in new buildings, and spend on research & development. However, report data shows that businesses plan to hire more people—including skilled workers—rather than to increase employee pay.
Doing business in the Philippines is not without its challenges. Local businesses cite shortage of finance, regulations and red tape, transport and ICT infrastructure, and economic uncertainty as constraints to further growth.