The Philippines is expected to grow more than 6 percent annually over the next decade, the second-fastest among six major Southeast Asian economies, a regional bank said.
DBS Bank, Angsana Council and Bain & Company released the “Navigating High Winds: Southeast Asia Outlook 2024-34” report Thursday, forecasting 6.1 percent annual growth for the Philippines in the 10-year period.
The Philippines, which grew 4.5 percent annually from 2000 to 2009, 6.4 percent from 2010 to 2019 and 2.3 percent from 2020 to 2023, is forecast to have the second-fastest expansion in Southeast Asia behind Vietnam’s 6.6 percent, but outpace Indonesia’s 5.7 percent, Malaysia’s 4.5 percent, Thailand’s 2.8 percent and Singapore’s 2.5 percent.
The report said the Philippines benefits from a pro-growth government prioritizing infrastructure investments, particularly renewable energy projects drawing investor interest. It can also reap demographic dividends, unlike Singapore and Thailand, which face challenges in this area.
As a whole, the six Southeast Asian economies are expected to grow 5.1 percent over the next decade, outpacing China in gross domestic product and foreign direct investment.
“As a result of strong domestic growth and the China-plus-one strategy, we are increasingly optimistic that Southeast Asia will outpace China’s growth in both GDP and FDI in the next decade. However, multinational investments will be highly contested, with competition between countries improving outcomes for both businesses and consumers,” said Charles Ormiston, advisory partner at Bain & Company and chair of Angsana Council.
“The world has turned increasingly protectionist and inward-looking in recent years, a trend unlikely to change. Yet, most Southeast Asian economies and companies are well placed to find opportunities as capital allocation is recalibrated across geographies and sectors, while dealing with tech disruption and climate change. We think the doomsayers are wrong; a decade of tailwind awaits the region,” said Taimur Baig, managing director and chief economist at DBS Bank.
The report said the region attracted more foreign direct investment than China for the first time in a decade in 2023. The six economies’ combined FDI totaled $206 billion, while China’s was $43 billion. Between 2018 and 2022, FDI in the six countries grew 37 percent, compared with China’s 10 percent.
The report provides a 10-year growth forecast for the six economies by reviewing factors affecting labor, capital and productivity. It highlights historical economic performances against traditional and contextual growth drivers.
Over the past 30 years, Southeast Asia’s GDP growth has been moderate, with Vietnam leading the region in most metrics. The six economies grew significantly slower than China or India. Between 1993 and 2003, real GDP growth in the six countries averaged 3.8 times. In comparison, China’s was much higher at 11 times, while India’s was 6.6 times.
One notable aspect is that most Southeast Asian countries peaked in manufacturing value added as a share of GDP in the 2000s. The region then “prematurely de-industrialized” as China became more competitive.
Southeast Asia has improved its fundamentals for a growth resurgence. Its domestic capital formation is increasing steadily, reflecting business confidence in most countries.
In the past decade, the region has strengthened key sectors such as export-oriented manufacturing, semiconductor packaging, and attracted investments in growth sectors such as data centers. The rise of technology-enabled disruptors has introduced increased competition and innovation even in traditional economic sectors.
Countries such as Malaysia, the Philippines and Indonesia have refocused their growth strategies, while Vietnam has pulled ahead.
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