How the millennial consumer is reshaping the PH economy
MANILA, Philippines – The Philippines may attain an economic growth of 7% to 8% within a decade should it capitalize on the country’s expanding youth who are mostly described as enthusiastic, optimistic, and entrepreneurial, Maybank Group said on Tuesday, August 25.
"The Philippines is on the cusp of an economic transformation and the key driver will be its favorable demography," Maybank Group CEO Datuk Abdul Farid Alias said during Invest ASEAN 2015 Edition Conference.
According to Maybank, which is ASEAN’S 4th largest bank by assets, the Philippines has a young population with a median age of 23 and declining fertility rate. This will lead to an increase in the number of working adults who will drive domestic demand and spur economic growth.
Maybank said the Philippines' potential gross domestic product (GDP) growth currently is 6% to 7%, but demographic dividends are expected to drive it to 7% to 8%.
The economy's growth in the first quarter is slower than the 5.6% GDP growth in the same period in 2014. It was also down from 6.6% in the 4th quarter last year, and the slowest pace since the 3.8% growth recorded in the last quarter of 2011.
The Philippine Statistics Authority is set to announce the Philippines' second quarter GDP growth on Thursday, August 27.
Surging middle class
According to Maybank, the Philippines’ surging middle class will provide the kick to a much stronger economic growth within a decade. But that entails taking the right steps with respect to education, labor policy, and productivity-enhancing measures.
The lower fertility rate will impact the Philippines' population structure resulting in an increase in the size of the workforce relative to young and old dependents, said Maybank, citing data from the 2014 Population Reference Bureau.
"This could lead to a rise in disposable income and the doubling of the middle class which bodes well for the Philippines where private consumption is the bedrock of its economy, accounting for about 70% of total GDP," Alias said during the conference.
Private consumption in the country, according to Asian Development Bank chief economist Shang-Jin Wei, has been high and steady.
"This is unlikely to change as per-capita income continues to rise, unemployment falls, and growth becomes more widely dispersed throughout the country," Wei said.
The increasing spending among millenials has forced companies to change the ways they buy and sell and examine how they do business for decades to come.