Population (2020): 109 million
GDP (2020): US$361.49 billion
World Bank “Ease of Doing Business” Rank (2020): 95
Trading Partner Rank (2020): 17
The Philippines is one of the most dynamic economies in the region, with a robust and sustained average GDP growth of 6.4% between 2010 to 2019. The country’s growth is largely attributed to increasing urbanisation, a growing middle class and a large and young population, contributing to growing domestic consumption. This is fueled by a vibrant workforce market, especially from the Business Process Outsourcing (BPO) industry and overseas remittances from Filipinos working abroad, who make up approximately 10% of the population.
Foreign investments into the market have also been growing, with interest in manufacturing, information and communications technology (ICT), and real estate sectors. Despite the challenges presented by the COVID-19 pandemic, the Philippines maintains its credit rating of “BBB” from major credit raters, which indicates a vote of confidence in the country’s economic and fiscal management. While the economy contracted significantly in 2020 due to the pandemic and strict quarantine measures implemented in the country, economic growth has shown signs of gradual recovery in 2021 with the containment of the virus, improved business confidence, growing domestic consumption, and increasing investments.
With a population size of over 109 million people, the Philippines is the second largest consumer market in Southeast Asia. The country’s population is projected to grow further to more than 127 million people by 2030. Coupled with a population median age of 25.6 years old, the Philippines presents a large, young and attractive demographic for consumer businesses looking to enter the market.
The Philippines is also targeting to achieve upper middle income country status in the near term. This progress is expected to grow the country’s middle class and result in accelerated demand for better consumer goods and services. As the global and domestic economy recovers, overseas Filipino workers’ remittances, which represents nearly 9.2% of the country’s GDP, is also expected to increase, driving domestic consumption and enhancing the attractiveness of the market for consumer businesses. Many notable Singapore consumer and tech-related companies, such as Clozette, Carousell, Grab, Irvins, Shopee, Shopback and SGAG, have already expanded into the Philippines.
Connectivity in the Philippines has expanded rapidly in the past decade. Today, there are more than 73 million internet users in the Philippines, and internet penetration in the country stands at 67%. Between 2020 and 2021, the country saw a 6.1% growth in the number of internet users, and this figure is expected to grow. With the COVID-19 pandemic restricting mobility, the connected population of Filipinos have been increasingly adopting digital services into their daily lives. These include digital financial services, e-commerce, food delivery, and online media.
To reach out to consumers and enable business continuity during these dynamic times, many businesses in the Philippines have had to tap digital solutions to re-engineer their operations, diversify sales channels, and innovate. This presents emerging opportunities for tech companies with digital solutions, especially those that can activate digitalisation of the delivery of services across a wide range of sectors, including education, financial services, health services, insurance, mobility, and security services.
Singapore consumer businesses that have traditionally focused on brick and mortar operations could also explore engaging the Filipino consumers through digital channels, such as e-commerce and cloud kitchens for food delivery.
Infrastructure development is a key pillar and priority in the Philippines. In 2017, the Philippines government embarked on an ambitious US$180 billion (S$243 billion) “Build Build Build” infrastructure programme with the target to transform its economy by 2022.
Today, seven flagship infrastructure projects and more than 212 airport projects, 446 seaport projects, 10,376 flood mitigation structures, 26,494 kilometres of road and 5,555 bridges have already been completed under the programme. Amid the challenging economic climate brought by the pandemic, infrastructure development will be one of the key drivers of economic recovery for the country. At the same time, increasing urbanisation and needs of the growing population will also put pressure on further development of infrastructure across the country. In particular, a growing demand for solutions in decentralised infrastructure has been observed to bring basic utilities to previously unserved areas across more than 7,000 islands that make up the Philippines. Hence, projects in the areas of healthcare, renewable energy, transport, waste management, and water sectors will continue to emerge from the market.
The Philippines Government has embarked on an active push to attract greater foreign investments into the country, introducing new initiatives and laws to create a conducive environment for foreign companies in the Philippines. In March 2021, the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act was passed into law. The Act aims to grant tax relief for companies in financial need, provide transparent tax provisions and further increase the competitiveness of the Philippines. Foreign companies can look forward to a reduced corporate income tax rate of 25% as compared to the regular rate of 30%, till July 2022. From 2022 to 2027, the corporate income tax will steadily decline by one percent per year, to reach 20% in 2027 for foreign companies.
Companies looking to access construction and infrastructure projects will also benefit from a recent change in the Contractors License Law that allows 100% foreign owner construction companies to get a Regular License. This will in turn increase access to projects in the market.
The Philippines is also currently reviewing amendments to three laws – the Foreign Investments Act, the Public Service Act, and the Retail Trade Liberalization Act. If passed, these regulations will reduce capitalisation requirements for foreign investments in retail trade, and remove foreign equity restrictions to enhance competition in the local telecommunications industry.
With lowered barriers to entry, Singapore companies can explore more opportunities for market entry and collaboration with local partners to grow their footprint in the Philippines.