Capital Economics: PH to become world’s 18th biggest economy in 2050

The Philippines is poised to become the world’s 18th biggest economy by 2050 as long as it addresses its infrastructure lack, long-term projections by London-based macroeconomic research organization Capital Economics showed.

Capital Economics’ Long Run Economic Outlook report, which was released last week, a copy of which was obtained by the Inquirer, projected the Philippines’ nominal gross domestic product (GDP) climbing to $4.862 trillion three decades from now, such that nominal GDP per capita would also rise to $33,650.In 2019 or before the COVID-19 pandemic inflicted the Philippines’ worst post-war recession in 2020, its nominal GDP was the 30th largest in the world.

Due to the low 2019 base, Capital Economics earlier projected the Philippines’ GDP to grow by 11 percent both this year and next year.

Its latest forecasts showed that by 2050, the Philippines would only be behind the following countries in terms of nominal GDP at market exchange rates: the United States, China, India, Germany, Japan, the United Kingdom, Indonesia, France, Canada, Australia, South Korea, Mexico, Russia, Vietnam, Italy, Brazil, and Egypt.

To fulfill its economic growth potential, the Philippines must improve its “dreadful” infrastructure, Capital Economics said.

After posting average real GDP growth rates of 5 percent in 2006-2010, 6 percent in 2011-2015, and 3.4 percent in 2016-2020, Capital Economics expects the Philippines’ yearly economic expansion at an average of 7.9 percent in 2021-2025; 5.3 percent in 2026-2030, and 4.4 percent in 2031-2050.

Inflation is seen to stay steady at an average of 2.9 percent in 2021-2025 and 3 percent from 2026-2050. Headline inflation averaged 4.9 percent in 2006-2010; 3 percent in 2011-2015, and 2.9 percent in 2016-2020.Productivity in the Philippine economy was projected to grow by 5.9 percent in 2021-2025; 3.6 percent in 2026-2030; and 3.3 percent in 2031-2050—faster than the productivity growth rates posted in 2006-2010 and 2016-2020 of 2.2 percent. In 2011-2015, productivity grew by 3.8 percent.

The growing economy would also be boosted by an increasing population—a huge domestic consumer and labor market expected to reach 117 million by 2025, 124 million by 2030, and 144 million by 2050, based on Capital Economics’ projections.

In the Asean, while the Philippines would overtake by 2050 Thailand’s nominal GDP, which in 2019 ranked 23rd biggest, its ascent would be eclipsed by neighboring Indonesia and Vietnam.

From 16th in 2019, Indonesia’s nominal GDP would rank seventh by 2050.

Vietnam, meanwhile, would surpass Thailand, the Philippines, Singapore (ranked 31st in 2019), and Malaysia (33rd in 2019) as its economy would jump to become the 14th largest in 2050 from 35th in 2019.In 2050, Malaysia’s GDP would rank 26th; Thailand’s, 31st, and Singapore’s 40th.

On a nominal GDP per capita basis, Singapore’s relatively smaller population would put the island-state at an advantage such that the share of individuals to the economy would be the biggest in Asean by 2050 at $233,663 per person.

By the middle of this century, nominal GDP per capita in Indonesia was estimated to amount to $36,314; in Vietnam, $56,048; Malaysia, $67,460; and Thailand, $36,011—all higher than in the Philippines.

During a webinar last week, Capital Economics chief Asia economist Mark Williams said that among emerging markets, Bangladesh, India and Vietnam would benefit from manufacturing and export-led growth in the long term.

From fifth largest in 2019, India’s GDP would rank third by 2050, while Bangladesh’s would jump from 38th to 20th, Capital Economics’ estimates showed.

In the case of the Philippines, Capital Economics senior Asia economist Gareth Leather in an email to the Inquirer pointed to a 2014 report wherein he had said low costs and improving business environment in the country might help the country become a manufacturing powerhouse over the next decade. INQ