Private sector may be 2025’s main gainer worldwide, says KKR

Whether at home or abroad, the private sector will likely be next year’s main gainer as investors gradually shift away from government-focused initiatives amid ballooning deficits across the globe, according to KKR.

The global investment firm, in its 2025 Global Macro Outlook report, noted a general desire for “less government,” leaving room for “larger private sector role in key growth markets.”

“Areas such as digital infrastructure, space exploration, retirement savings and defense are likely to see outcomes shaped by increased private investment,” KKR said in its report.

READ: Filipinos look to private sector to provide jobs, cheaper goods

In the Philippines’ case, for example, the country’s fiscal position swung back to a deficit in November to P213 billion, more than double the P93.3-billion shortfall a year ago.

This brought the 11-month budget shortfall to P1.2 trillion, or 79 percent of the administration’s P1.52-trillion revised deficit cap for the year, data from the Bureau of the Treasury showed.

A budget deficit is incurred when the state’s spending exceeds its revenue collections.

Henry McVey, head of KKR’s team on global macro and asset allocation, the global phenomenon of increasing deficits comes amid the need for “huge investments in infrastructure, security, workforce development and supply chain needs.”

READ: Private sector makes things happen

McVey said that, as a result, there had been a general political discontent.

“Moreover, for those not invested in the equity or housing markets, a stark divide between the ‘haves’ and ‘have-nots’ has contributed to record levels of inequality,” he added.

With the expected shift toward the private sector for investment, KKR is also seeing companies becoming more capital-light.

This means corporations will shed some of their assets, such as physical infrastructure, in favor of those that are less costly, like digitalization.

Opportunity for gain

Further, McVey pointed out that credit providers could take this as an opportunity to gain more profit, as they typically arrange asset sales for companies.

“As part of this transition, we see key growth markets emerging in India, the Middle East and other parts of Southeast Asia,” he said.

Still, McVey noted that there remained key investment themes—infrastructure, artificial intelligence (AI) and energy—that would require a hefty private capital size over the next decade for vital projects to come into fruition.

To address this gap, he explained that US President-elect Donald Trump would likely promote “faster growth” and address significant deficits through reduced regulation and tax cuts.

This, McVey said, will allow “economic independence, including resilient supply chains and increased local energy production from traditional sources, particularly in light of the surging energy demands driven by AI.” —Meg J. Adonis