Philippines in a sweet spot

The Philippines is one of the world’s fastest-growing economies, and it shows no sign of slowing down. GDP expanded by 6.5% year-on-year in the second quarter of 2017, slightly up on the 6.4% recorded in the January-March period. This is the eighth successive quarter of growth exceeding 6%. The economy is now bigger than Singapore’s and Malaysia’s. And there is scope for the pace to accelerate.

The government is planning to increase spending on infrastructure to 7.5% of GDP by 2022, up from just 5.2% last year. The extra
spending will juice growth in the short term – to around 7.5% in 2019, reckons the government – and raise the economy’s long-term speed limit. A tax reform bill will help pay for the extra spending. It includes a reduction in corporation tax, the closing of expensive loopholes, and higher levies on cars and petrol – the latter being “a squeeze on richer Filipinos, given that less than one in ten owns a car”, as The Economist points out.

Meanwhile, thanks in part to an English-speaking workforce, the economy has developed a strong foothold in business-process outsourcing, or back-office administration. In just 15 years this sector has mushroomed from nothing to 9% of GDP. Remittances from abroad, worth 10% of GDP, are giving consumption a further fillip.

The only fly in the ointment is Rodrigo Duterte, the populist president unnerving investors with erratic and counterproductive policies, such as suspending rice imports or scrapping tuition fees. But most of his policies “get watered down or shelved by underlings” before they cause serious upheaval, says The Economist. For now, at least, it’s all systems go.