Perspectives
20 March 2025
A country of 110 million, the Philippines has a number of key criteria in its favour and is becoming the focus of attention for investors eyeing opportunities in new and emerging economies. Along with robust economic growth, a domestic-geared market relatively sheltered from external forces, low unemployment, and an investment-friendly environment, it has a young and digitally native population, increasing urbanisation, and growing demand for low cost, renewable energy.
Currently the second-fastest growing economy in Southeast Asia1 and one of the fastest-growing in Asia,2 the Philippines has for the past three years enjoyed annual GDP growth of between 5 and 7 per cent.3 That is forecast to continue at around 6 per cent a year for the remainder of the decade.
Consumer spending is the country’s top contributor to GDP, a factor that boosts the economy’s resilience to external shocks.
“The Philippines is a very local, consumption-driven market – around 70 per cent of GDP is driven by local spending,” notes Trishia Simeon, Associate Director for Macquarie Asset Management. “So, it remains relatively insulated from the gyrations of the global geopolitical and economic landscape.”
Growing investor appetite for the Philippines is reflected in the growth in inbound investment, which last year increased 32 per cent to $US12.6 billion.4 This could rise further following regulatory changes, which lowered corporate income tax rates and granted greater fiscal incentives to qualified companies.5
The country’s population has a median age of 25.7 years,6 giving it a ‘demographic dividend’ that lies in stark contrast to the ageing populations of some of its regional neighbours.
“The biggest point of optimism for the Philippines is its demographics,” notes Justin Ocampo, Managing Director, Philippines for Macquarie Capital. “We have a young population and a strong likelihood of upward mobility for most young Filipinos.”
It also has a growing middle class. Whereas in 1991, 29 per cent of the population were middle income earners, by 2021 this had risen to 40 per cent.7
"The young, dynamic population will support sustainable growth, driving demand for higher-quality products and services as economic mobility rises,” says Ocampo.
As the nation’s ‘population bulge’ comes of age and enters its most productive years, it should fuel greater domestic consumption and economic growth, while also requiring investment in key infrastructure to support digitalisation, energy resilience and urbanisation.
The biggest point of optimism for the Philippines is its demographics. We have a young population and a strong likelihood of upward mobility for most young Filipinos.”
Justin Ocampo
Managing Director, Philippines for Macquarie Capital
Right across the Philippines, levels of development still vary markedly: ranging from the advanced infrastructure of Metro Manila to rural areas that lack stable power supply, clean water or adequate sanitation.
These disparities serve to heighten a marked infrastructure deficit, resulting in a critical need for productive infrastructure8 such as energy and transportation networks, and ongoing access to the capital and expertise necessary to help the country modernise and expand them.
As it has in many emerging economies, the Philippines recognises the need for private capital to play a key role in addressing its infrastructure deficit. In 2024, it announced 169 new Public-Private Partnership (PPP) projects. Spread throughout the country and worth a total of $US55 billion (PHP55 trillion), they include airports, hospitals, bridges, rail networks and water supply projects9 and are designed to fill both immediate- and medium-term gaps in the critical systems that will need to evolve as the Philippine economy matures.
To attract foreign investment, the government liberalised foreign investing laws, allowing 100 per cent foreign equity in many areas of the economy.10
“There are more and more opportunities in the Philippines, yet as with any emerging economy, the path to success is never a straight line,” advises Simeon. “This is where the value add of an experienced infrastructure investor that has been in the market for a long time comes into play.”
For Simeon, many of today’s conversations with potential inbound investors, begin with her visitors voicing surprise at Macquarie’s longstanding track record in the local market. “Not many people realise we have been present in the Philippines for 20 years,” she says.
“Macquarie was investing here long before it became an attractive destination for private capital. Our teams have deployed $US2 billion of capital into eight investments across the country, including in energy, transport and logistics.”
As seen globally, rapid digitalisation is already impacting the Philippines, creating ongoing investment opportunities in the digital ecosystem including towers, data centres, fibre and other related technologies.
Macquarie Capital has been invested in telecommunications towers company, PhilTower since 2021, playing an important role in supporting its growth since that time. Telecommunications towers are essential infrastructure that enable mobile and internet connectivity, forming the backbone of reliable communications networks.
In September 2024, PhilTower and Miescor Infrastructure Development Corporation (MIDC) completed a transaction that will combine PhilTower and MIDC’s existing towers and expertise, creating one of the largest independent telecommunications towers companies in the Philippines.11
The new Philippines-wide PhilTower has a portfolio of over 3,300 operational towers and is well-equipped to meet the country’s increased demand for connectivity and quality digital infrastructure.
“The need for digital infrastructure is being driven by the continued consumption of digital services,” says Ocampo. “Amidst our growing digital economy, there are still some notable gaps in towers and fibre, which are of course opportunities for investors,” he notes.
As the Philippines rapidly digitalises, it is driving up demand for power in a country where electricity demand has consistently grown alongside GDP – and where energy costs are already among the highest in the region.12 “The Philippines is highly dependent on the importation of coal and gas, so is a very dollarised energy market at present,” says Simeon.
The need for greater energy security and resilience is one of the reasons the country has set ambitious targets for renewable energy – aiming for 35 per cent renewable energy in the power generation mix by 2030 and 50 per cent by 2040.13 This makes it one of Asia’s most attractive investments for renewable energy.14 Recent estimates suggest that the Philippines requires cumulative investment of over $US300 billion between now and 2040 to meet its targets.15 To expand the pool of capital available, in 2022, the government enacted regulation to remove foreign direct investment (FDI) restrictions in the energy sector.
Macquarie already has a sizeable presence in the Philippines’ renewables space. In 2017-18, a Macquarie Asset Management (MAM)-led consortium acquired a significant stake in Energy Development Corporation (EDC) - the largest producer of geothermal energy in the country.
Managing 1.5GW of renewable energy generation capacity across geothermal, solar, hydropower and wind,16 it accounts for around 20 per cent of the Philippines’ annual renewable power.17
“Thanks to the scale of the EDC platform and quality of our investment partner – who are making strategic investments across key sectors in the Philippines – we see strong potential for further opportunities, including in battery energy storage,” says Simeon.
Macquarie was investing in the Philippines long before it became an attractive destination for private capital. Our teams have deployed $US2 billion of capital into eight investments across the country.”
Trishia Simeon
Associate Director for Macquarie Asset Management
Macquarie’s direct operations in the Philippines employ over 1,000 people providing services and solutions to clients including mergers and acquisitions, public-private partnership advisory, equity research, asset management, as well as global support functions.
While there are risks to consider when investing in any market, the Philippines’ current investment landscape presents significant new opportunities for investors across a range of sectors throughout the country; with robust economic fundamentals offering strong potential upside.
“From a business perspective, I think that the best is yet to come,” notes Simeon.
“There's a lot more focus on Southeast Asia among investors, especially as their understanding of the region grows. Over time, with the maturity of the market and investor interest, we believe even larger opportunities will emerge more frequently. We’re confident that by continuing to work closely with our partners, the investment outlook in the Philippines will continue to look ever more exciting,” she says.
