With the Philippines seen to be making the right moves, Standard Chartered Bank (StanChart) now believes the country's economy can grow annually by 8 percent-"or even more"-starting in 2015.

And considering that the Philippines outperformed China, the economic powerhouse in Asia, in the first quarter of the year with 7.8 percent GDP growth, the global banking giant added that it's possible the Filipinos will "continue to do better" than the Chinese.

"In terms of the Philippines we have been quite positive for some time now. We still are very positive. We expect a growth rate this year of around 7 percent. Within the next three, four years there is no reason why the Philippines cannot start growing significantly faster than China for example," Marios Maratheftis, StanChart Global head of Macro Research, said.

"There is no reason why from 2015 onwards the Philippines cannot be growing at 8 percent plus," he added.

Maratheftis said that while there are risks to these forecast, these risks are "on the upside rather than on the downside."

"The levels of debt are very low so it's leveraged compared to the rest of the region and compared to the rest of the countries. What we're also seeing is GDP is growing much faster than credit in the Philippines, which is a healthy sign. It also shows that for what the Philippines businesses and households...they can create much more economic activities than other countries can," Maratheftis said.

One area where the Philippines lags, he said, is in terms of foreign direct investment.

"Wherein there is a lot of room for the Philippines to catch up and within that the positive growth story, the private-public partnership model that the government is introducing, which is already a success, and the fact that the country has already been upgraded by the credit rating agencies are significant drivers of foreign direct investments (FDI)," he said.

For the country's growth to be sustained, the government needs to convince foreign investors to invest decisively in the country as it still lags among its Asean neighbors in terms of FDI.

Jeff Ng, StanChart analyst, said that the country's FDI growth lagged that of Indonesia and Thailand.

"For all of its economic outperformance, the Philippines is yet to convince foreign investors to invest decisively in the country. The Philippines has so far not outperformed its Asean neighbors in terms of attracting FDI into the country," Ng said.

Data from the Bangko Sentral ng Pilipinas showed that FDIs continued to register net inflows amounting to $1.3 billion in the first three months of 2013.

However, this level was lower by 8.5 percent compared to the $1.4 billion recorded in the same quarter last year.

BSP said the decline in cumulative FDI was due mainly to lower net equity capital investments in the first quarter of the year.

"With already-slow investment growth compared with other Asean countries, the Philippines will need to attract FDI to complement domestic market-driven investment," he added.

Ng also noted that other factors on the attractiveness of the Philippines as an investment destination. These include a relatively young and sizeable English-speaking population, the highest percentage of working population to total population, and the fact that Fitch's and S&P's recent upgrade of the Philippines to investment grade is likely to lower borrowing costs for investment.

However, Ng noted that the country is perceived as being a difficult place to do business. In the World Bank's Ease of Doing Business Index, the Philippines ranked particularly low, finishing at the bottom of the Asean-6.

The report cited problems with starting a business, resolving insolvencies and paying taxes, and the lack of infrastructure development.

"Both local and international investors agree that infrastructure needs to be developed, even though many acknowledge progress is under way. The Philippines will therefore benefit from PPP-led infrastructure development, along with smoother process flows in corporate governance," Ng said.

"We think that confidence in the overall business environment will play an important role in investment growth," he added.

Steve Brice, StanChart Chief Investment Strategist, also believes that policy rates will remain unchanged for the rest of the year and to rise to 4 percent by mid next year.

By malaya.com.ph

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