The Philippines is a promising country, offering significant potential to investors. Its exports are moving away from agriculture towards higher value manufactured goods. The country has a virtually untapped mineral-rich south, which could be more accessible if political progress in the region continues on the right track.

Our coverage – using our unique Total Analysis model – ensures that our clients make well-informed investment decisions in the Philippines. Our teams keep them abreast of the latest market moves and political developments as part of our 'top-down' and 'bottom-up' perspective. We also provide in-depth analysis of the Philippines’ 21 most important industries. Our winning combination of interactive data and forecasting, alongside our risk-assessed and results-proven analysis, will ensure that you, as one of our clients, are always one step ahead in the Philippines.

Country Risk

Philippines Country Risk

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Core Views

•  We continue to hold a positive outlook for the Philippine economy, and are forecasting for real GDP growth to come in at 6.3% in 2014. However, tighter monetary policy in 2015 is likely to cause real GDP growth to ease to 6.0%.

•We continue to see the Bangko Sentral ng Pilipinas raise its benchmark interest rate by another 50 basis points to 4.50% in 2015, owing to continued price pressures emanating from a potential electricity shortage in Luzon and likely interest rate normalisation in the US in the coming year.

•Ongoing fiscal consolidation efforts by the Philippine government will ensure a sustainable budgetary trajectory over the coming years. We forecast for the country's budget deficit to narrow to 0.8% of GDP in 2014 and 0.6% in 2015, from 1.4% in 2013. However, the lacklustre fiscal spending will...

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Philippines Operational Risk Coverage (9)

Philippines Operational Risk

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The Philippines poses considerable security threats to international investors, and we hold a generally bearish outlook in regards to criminal, terrorism, and interstate conflict risks.

Petty crimes, particularly those to the person, remain a pertinent issue in the Philippines, affecting both locals and foreign tourists and business travellers. Organised crime is also an issue, with foreign criminal gangs, particularly from China, Hong Kong, and Taiwan, operating in the country. As with most countries, but especially emerging markets, official crime statistics understate the true level of crime. The Philippine National Police (PNP) is limited in its capacity to respond and assist victims of crime due to a lack of response vehicles, radios, and other essential equipment. Moreover, corruption is a major problem in the Philippines. According to Transparency International's Global Corruption Index, 69% of Filipinos consider the police either...

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Philippines Crime & Security

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The Philippines poses considerable security threats to international investors, and we hold a generally bearish outlook in regards to criminal, terrorism, and interstate conflict risks.

Petty crimes, particularly those to the person, remain a pertinent issue in the Philippines, affecting both locals and foreign tourists and business travellers. Organised crime is also an issue, with foreign criminal gangs, particularly from China, Hong Kong, and Taiwan, operating in the country. As with most countries of the world, but especially emerging markets, official crime statistics understate the true level of crime. The Philippine National Police (PNP) is limited in its capacity to respond and assist victims of crime due to a lack of response vehicles, radios, and other essential equipment. Moreover, corruption is a major problem in the Philippines. According to Transparency International's Global Corruption Index, 69% of Filipinos consider the...

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Philippines Labour Market

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The Philippines is a country with huge potential to be one of the premier destinations as a market for labour, with a large population and growing pool of educated workers. However, it frequently underperforms the rest of the Asia region across a number of indicators in our Labour Market Risk Index, with competitive labour market countries such as India able to undercut its low minimum wages to attract investors. Overall the Philippines scores a total Labour Market Risk ranking of 47.2 out of 100 in our Labour Market Risk Index.

One area in which The Philippines looks set to perform well is through its high production of English-speaking, science, engineering and ICT graduates, which has resulted in an a boom in companies looking to outsource work to the Philippines, preferring the accent of Filipino-English speakers to that of the Indian accent. Unemployment and underemployment remains high, with a potentially large pool of workers...

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Philippines Logistics

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Two of the worst risks facing incoming businesses are the limited reliability and comparatively high costs for utilities and fuel, and the inadequate and poorly maintained transport networks. However, these risks are mitigated by the comparative ease of trading to and from the Philippines, and the limited costs and bureaucracy which make the country an attractive destination for companies reliant on imports or focused on trade. With an overall score of 55.7 out of 100, placing it in 16th place regionally in our Logistics Risk Index, it is clear that there are a number of detrimental factors increasing the operational risks facing potential investors and businesses considering entering the Philippines.

We believe that with greater reform and investor awareness, the Philippines may fulfil its potential in South East Asia in the near future. Private consumption growth will follow investment growth, resulting in an increase in containerised...

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Philippines Trade & Investment

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BMI believes that there are a number of trade opportunities in the Philippines, but highlight that risks remain fairly pertinent. The country scores 43.7 out of 100 in our Trade And Investment Risk ranking, placing it in 15th position out of its 29 Asian peers. This puts the Philippines just ahead of Vietnam and Kiribati, but behind Fiji and China.

While the Philippines still lags behind its regional peers in terms of foreign direct investment (FDI) inflows, we believe that the country will soon catch up, owing to its strong macroeconomic fundamentals, an ongoing improvement in its business environment, a possible relaxation of its foreign ownership rules which could act as a catalyst, and its increasingly stable political climate.

The country's banking sector outlook is relatively positive, as we expect healthy demand for loans, combined with steady remittance inflows, improving governance, and...

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Philippines Industry Coverage (21)

Agribusiness

Philippines Agribusiness

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Sri Lanka Telecoms Sector Key Players
Company Name Ownership Market
Sri Lanka Telecom Secretary to the Treasury (49.5%), Global Telecommunications Holdings (44.98%), Employees Provident Fund (1.13%) Fixed line, internet
Suntel Acquired by Dialog Axiata in Q112 and forms part of Dialog Broadband Networks division Fixed line, internet
Dialog Axiata

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Autos

Philippines Autos

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According to the Chamber of Automotive Manufacturers of the Philippines (CAMPI) and the Truck Manufacturers Association (TMA), vehicle sales in the Philippines rose 19.9% year-on-year (y-o-y) in April 2014, to 18,094 units. This brought sales for the first four months of 2014 to 69,737 units, an increase of 22.1% y-o-y.

While we are maintaining our CV sales forecast for the full year, passenger car sales have been growing from strength to strength, prompting us to upgrade the segment's sales forecast. We now forecast passenger car sales to grow 22.0% versus 13.0% previously, which will revise our 2014 total vehicle sales growth forecast from 11.6% to 14.7%.

April's car sales were helped by the extension of summer promotions by automakers and we expect sales to remain strong over the course of the year, supported by the country's strong economic growth outlook. Our Country Risk team maintains its 2014 real GDP growth...

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Commercial Banking

Philippines Commercial Banking

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Commercial Banking Sector Indicators 
Date Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits

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Consumer Electronics

Philippines Consumer Electronics

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BMI View: we expect strong sales growth in the Philippine consumer electronics market over the medium term as incomes rise and device prices decline amidst intense vendor competition.   We forecas t growth of 6.4 % in 2015 , a slight deceleration from 2014 as the AV segment returns to a lower growth trajectory after demand was boosted in 2014 by TV set sales ahead of the FIFA World Cup . Consumer electronics spending is expected...

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Defence & Security

Philippines Defence & Security

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BMI View:   While opportunities exist in the Philippines defence market in the short term, opportunities in the medium-to-long term are far from certain. Although the defence spending is increasing, there is a need to place it within a regional perspective. We think that the risk of Philippine involvement in an interstate conflict has increased slightly over the last quarter. Also, the scaling back of US support for the Philippines counter-terrorism program may not bode well in the long term.

Relations with China further deteriorated following the Philippines sentencing of 12 Chinese fisherman arrested for illegal fishing in non-disputed waters. Another trial of Chinese fishermen for supposed activity near the disputed Spratly Islands risks aggravating further tensions between the two countries.  BMI thinks that these incidents demonstrate the...

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Food & Drink

Philippines Food & Drink

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Executive Summary

BMI View : While the Philippines' economy continues to expand at a healthy rate and despite its expanding base of young consumers, we believe that the country offers limited potential in its grocery and food and drink markets. Multinational investment has been slow to penetrate the market, which in itself continues to present numerous challenges to players in the sectors. Issues such as widespread poverty, highly uneven income distribution, under - developed mass grocery retail networks and high levels of unemployment will continue to weigh on the consumer outlook.

Headline Industry Data (local currency)

? 2014 per capita food consumption = +5.98%; compound annual growth rate (CAGR) forecast 2014 to 2017 = +4.54%

...

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Freight Transport

Philippines Freight Transport

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The Philippines freight picture should prove to be a relatively fruitful one in 2015 across all of the modes. Spurring this is news that the Philippines' exports increased 12.4% to USD5.5bn in July, compared with USD4.9bn in the same period a year before, according to the Philippine Statistics Authority on September 10 2014. The National Economic and Development Authority (Neda) has attributed the double-digit rise in export shipments to an increase in overseas sales of agro-based and manufactured goods. 

Shipments of agro-based goods climbed 20.7% to USD447.2mn in July 2014, while exports of manufactured goods increased 15.9% to USD4.4bn. In addition, the country's exports rose 8.5% to USD35.1bn in the first seven months of 2014, compared with USD32.4bn in January-July 2013. However, the looming power shortage in the country has threatened to slow growth, according to Neda director-general and Socio-economic Planning Secretary Arsenio M...

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Information Technology

Philippines Information Technology

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BMI View: W e have a bullish outlook for the development of the   Philippines ' IT market , as we identify it as a regional outperformer over the medium term . The l ow penetration of products and services has left an opportunity for vendors to target the market as incomes rise and device prices decline , creating a fertile environment for a period of robust catch-up growth . Meanwhile, the booming business process outsourcing ( BPO...

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Infrastructure

Philippines Infrastructure

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BMI View:   Growth in the Philippines construction sector returned to positive territory in Q214, with a solid real expasion of 5.1% year-on-year (y-o-y). Heading into 2015, reconstruction efforts stemming from the aftereffects of Typhoon Yolanda in late 2013 should provide a strong tailwind for construction activity, and we forecast the sector will experience real growth of 9.6%.

Key Trends And Developments

  • The Public-Private Partnership Centre revealed in November 2014 that 12 companies have obtained prequalification documents to bid for the operation and maintenance contract of the Manila LRT Line 2 in the Philippines. The winner will operate and maintain the existing 13.8km line and a 4.19km extension with two stations to Masinag, for 10-15 years. The companies include RATP Dev, Hyundai Rotem Company, TUV...

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Insurance

Philippines Insurance

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BMI View:   Philippines life insurance will remain among the fastest growing in the region, expanding by 1 8 % between 2015-2018 and rising to a premium of USD 9.1 bn by 2018 . N on-life premiums will grow much more slowly , at an annual average growth of just 9.6% , with premiums reaching 2bn by 2018. T he non-life market is underperforming with the insurance densit...

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Medical Devices

Philippines Medical Devices

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BMI Industry View:   An above average market growth rate of 9 .7% is projected for the Philippine medical device market and much of this demand will continue to be met by imports. Demand continues to vary by region, with the capital and surrounding areas continuin g to provide the best prospects for growth.

Headline Industry Forecasts

  • The Philippines medical device market is expected to grow at a solid 9.7% in the medium term. This growth will be spearheaded by the growth of imports, health expenditure, the private sector and medical tourism.

  • In US dollar terms, annual imports grew by 7.1% to reach US$243.9mn in 2013. Imports grew every year during the 2009-2013 period, with growth...

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Mining

Philippines Mining

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BMI View : The looming exit of Glencore Xstrata's stake in the US$5.9bn Tampakan copper-gold project reinforces our conviction that mining investment in the Philippines will become less attractive amidst the downturn in commodity prices over the coming years. Despite rice mineral deposits in the country , resource nationalism will remain an issue a s the Philippine government looks to implement more onerous regulatory reforms in the mining s pace.

We believe the retreat of commodity prices and...

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Oil & Gas

Philippines Oil & Gas

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BMI View:   The Philippines will likely remain a small producer of both oil and gas over our forecast period. Faster consumption growth than output increases will see the Philippines remain a net importer of crude oil and oil products, as well as join ing the ranks of gas importers in the world.    

The main trends and developments we highlight for the Philippines' oil and gas sector are:

  • We forecast relatively stagnant growth in the Philippines' oil and gas reserves, owing to the limited number of discoveries made.

  • Crude oil production may increase between 2014 and 2018 thanks to new projects coming online, but without further discoveries this could again fall from 2018.

  • ...

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Petrochemicals

Philippines Petrochemicals

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The Philippines petrochemicals industry fell behind overall manufacturing growth in 2014, but is expected to recover in 2015 as the automotive and construction sectors post stronger growth rates and local producer JG Summit Petrochemicals Corporation (JGSPC) ramps up capacity utilisation at its new cracker complex, according to BMI's latest Philippines Petrochemicals Report.

In the first nine months of 2014, the value of chemicals output fell 16.8%, while plastic fell 4.5% and rubber grew 17.7%. Although performance was expected to improve as a result of JGSPC's expansion, the company's new cracker with 320,000tpa ethylene and 190,000tpa propylene capacities struggled to come into operation.

Operations were temporarily halted in mid-June 2014 when the facility broke down leading to a big fire. The company was on the third phase of its plant commissioning when the accident...

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Pharmaceuticals & Healthcare

Philippines Pharmaceuticals & Healthcare

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BMI View: Our outlook for the Philippines ' pharmaceutical sector remains bullish, driven by an increasing population and high burden of disease profile. Generic medicines will continue to account for an increasing share of pharmaceutical sales in the Philippines, galvanised by expanding government provision of healthcare as well as improvements in generic drug distribution. This provides strong growth opportunities for generic drug manufacturers in an emerging market where economic growth will be sustained by robust private consumption. Howeve r, current access to medicines and treatment will continue to negatively impact the wider market.

Headline Expenditure Projections

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Power

Philippines Power

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BMI View: We expect to see robust growth in the power sector in the Philippines, with total generation expected to expand by an average by 4.3% during out ten-year forecast period until 2023. With recovery from the 2013 typhoon gathering pace, good domestic economic growth and a range of new projects being announced, overall the future is looking positive for the Philippines power market.

Notwithstanding the adverse effects that linger from Typhoon Haiayn that struck the Philippines in late 2013, we still expect to see growth in the longer term, with a range of projects including coal-fired plants and various renewable energy projects lending weight to higher growth forecasts. We expect total electricity generation growth of 3....

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Real Estate

Philippines Real Estate

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BMI View: Ongoing improvements in the Philippine's economy have been supported by the rapidly expanding business pro cess outsourcing (BPO) industry, which is helping boost demand for commercial real estate across the country. We see particular opportunities for investors in the office market due to the strength of the BPO industry, as well as retail developers looking to benefit from the country's increasing levels of private consumption.

Despite remaining underdeveloped when compared to Thailand and Malaysia, the Philippines' commercial real estate industry has achieved continued growth thanks largely to business process outsourcing (BPO) which is fuelling a rapid expansion in the services sector. The success of this industry will significantly influence the overall strength of the office real...

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Renewables

Philippines Renewables

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BMI View :   Energy demands in the Philippines continue to grow , and the coun try now faces a potential short fall in energy supply in the summer of 2015. The government is keen to reduce its reliance on expensive fuel imports and develop domestic production capacity in order to lessen the cost burden of electricity and av oid the threat of rolling black outs. This has resulted in a range of new projects arriving in the pipeline , however , it remains to be seen if the measures will be sufficient to avoid power cuts.

The government of the Philippines set ambitious renewable energy targets under the Renewable Energy Act of 2008 and the...

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Retail

Philippines Retail

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BMI View: Growing disposable incomes are driving sales of non-essential items such as clothing and furnishings in the Philippines, with the convenience food sector also growing rapidly as urban dwellers become increasingly wealthy . Additionally, growth is spreading beyond the capital of Manila to other regions. These factors result in a strong rise in household spending across all retail subsectors in the Philippines over the next few years. We are particularly positive about the future growth prospects for communications, health and transport, with spending on restaurants & hotels and furnishing & home also set to rise.

The Philippines retail report provides detailed information on household spending on various segments within the retail sector. Future spending patterns are identified, along with the key drivers behind these. The...

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Shipping

Philippines Shipping

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Philippines' top container facility in terms of container throughput, Manila International Container Terminal (MICT), is set to continue holding this position in the country's maritime sector in 2015, with BMI forecasting further steady growth. One of the country's largest facilities in terms of total throughput, the port of Cebu, is also expected to post an increase in its freight volumes. Over the medium-term, growth will continue at both the MICT and the port of Cebu.

Headline Industry Data

  • 2015 port of Cebu tonnage throughput is forecast to grow 3.7%, over our forecast period (2015-2019) we project an annual average increase of 4.0%.

  • 2015 MICT container throughput is forecast to grow 3.6%, over our forecast period we project an annual average increase of 3.0%.

  • 2015 total trade growth is forecast to grow at 5.6...

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Telecommunications

Philippines Telecommunications

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BMI View :   The Philippines telecoms market is largely a two-horse race dominated by incumbent Philippine Long Distance Telephone (PLDT) - which owns 63.4% subscription share - and Globe Telecom - with 36.6% share of the mobile market in Q114. A new entrant - media conglomerate ABS-CBN Corporation -launched its MVNO service under the ABS-CBNmobile brand in December 2013 using the network infrastructure of Globe Telecom. Despite the new competition, BMI believes market dynamics is likely to remain in favour of PLDT and Globe Telecom given their strong brand and unassailable scale, which make it hard for new entrants to compete effectively.

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