THE Philippines could regain economic growth momentum next year as the global artificial intelligence (AI) boom offers a new avenue for growth through investments in semiconductors, data centers and higher-value business services, HSBC said.
In a roundtable discussion with reporters on Tuesday, HSBC Chief Asia Economist Frederic Neumann said the country’s economic growth could rebound to 4.8 percent next year as external shocks fade, energy and food prices normalize and government spending recovers.
‘The structure of the Philippine economy remains actually quite healthy,’ Neumann said, pointing to the financial sector being in ‘good shape,’ a ‘robust’ balance of payments and manageable government debt.
HSBC sees roughly $50 billion of additional annual economic activity that businesses could potentially capture in the Philippine market, Neumann said in his presentation during HSBC’s flagship event on the same day.
Beyond cyclical economic recovery, Neumann said the global AI investment boom is an opportunity for the country to expand its role in regional supply chains.
With the Philippines already having a foothold on AI hardware supply chain, Neumann said its current presence in testing, assembly and packaging must ‘expand quite aggressively’ to claim a bigger share of the investment.
‘We already have kind of the beginning of that industry. We just need to build on that and grab some of the incremental investment. And that’s mostly a foreign direct investment story attracting this big investment,’ Neumann said.
Around $40 billion of AI-related goods are associated with the Philippines, although at a smaller scale compared to Singapore, Taiwan and Korea.
HSBC Philippines President and Chief Executive Officer Sandeep Uppal said the country’s semiconductor exports are currently worth around $20 billion, compared with roughly $100 billion for Malaysia.
‘The need of the hour is execution, not new ideas,’ Uppal said, stressing that the country needs more semiconductor manufacturing and supply chain investments.
Multinational companies are also continuing to establish global capability centers in the Philippines, increasingly focused on areas such as analytics, innovation and marketing, Uppal added.
Neumann said localized data centers would provide the digital infrastructure needed by business process outsourcing (BPO) companies and other businesses to use AI while maintaining low-latency access to computing and data.
‘We need localized data centers that help the BPO industry to remain competitive. And I think that you will see, in the next few years, a lot more data center investments in the Philippines,’ he added.
While there are energy shortages, water supply issues and land disputes, Neumann said this is not unique to the Philippines. ‘We have these problems everywhere…and there’s always a way to solve that.’
‘I wouldn’t be surprised if we see some big data center investments coming through because the industry is also looking at the Philippines, looking at the BPOs, and knows that there will be future demand for data centers,’ Neumann said.
‘As these data centers get built, workers get hired, infrastructure needs to be developed. So that drives growth,’ he added.