Become a Creator today!Start creating today - Share your story with the world!
Start for free
00:00:00
00:00:01
Under the Banyan Tree - ASEAN Insights: Philippines and Thailand
29 Plays1 year ago
Fred Neumann and Aris Dacanay dissect two key ASEAN economies, from what Christmas dinner can tell us about The Philippines’ labour force to how Chinese dating is powering an iconic Thai export. Disclaimer: https://www.research.hsbc.com/R/61/CjNWFRF Stay connected and access free to view reports and videos from HSBC Global Research follow us on LinkedIn https://www.linkedin.com/feed/hashtag/hsbcresearch/ or click here: https://www.gbm.hsbc.com/insights/global-research.
Hosted on Acast. See acast.com/privacy for more information.
Recommended
Transcript
Introduction to HSBC Global Viewpoint
00:00:02
Speaker
Welcome to HSBC Global Viewpoint, the podcast series that brings together business leaders and industry experts to explore the latest global insights, trends, and opportunities.
00:00:13
Speaker
Make sure you're subscribed to stay up to date with new episodes.
00:00:16
Speaker
Thanks for listening.
00:00:17
Speaker
And now onto today's show.
00:00:24
Speaker
This is a podcast from HSBC Global Research, available on Apple Podcasts and Spotify.
00:00:30
Speaker
However you're listening, analyst notifications, disclosures and disclaimers must be viewed on the link attached to your media player.
ASEAN Series Focus: Philippines and Thailand
00:00:46
Speaker
Hello from Hong Kong and welcome to Under the Banyan Tree.
00:00:49
Speaker
I'm your host Fred Newman, Chief Asia Economist at HSBC.
00:00:52
Speaker
My regular co-host Harold is on the road right now, but I'm delighted to welcome my fellow economist Iris Decanet who joins me to kick off a three-part special series on ASEAN.
00:01:03
Speaker
We're gonna zero in on the Philippines and Thailand in today's episode.
00:01:07
Speaker
From demographics to digitization to durian, we've got a great conversation for you coming up right here under the Banyan Tree.
Philippines' Economic Growth Factors
00:01:26
Speaker
Well, thanks for joining us, Aris, on the podcast.
00:01:29
Speaker
You're obviously the economist covering both the Philippines and Thailand.
00:01:33
Speaker
And we've really looked at ASEAN as a region where we see accelerating growth this year, despite some of these global headwinds.
00:01:41
Speaker
And some of the well-known stories in Southeast Asia are supply chain diversification, production moving from China to places like Malaysia and Vietnam, for example.
00:01:52
Speaker
But the Philippines is not really capturing much of that supply chain diversification.
00:01:58
Speaker
And yet it's one of the fastest growing economies in the region.
00:02:03
Speaker
Can you explain to us what's really driving Philippines growth?
00:02:08
Speaker
To answer that question, I want to start with a very short story of how I spent my Christmas in the Philippines.
00:02:14
Speaker
So we had a dinner feast basically.
00:02:16
Speaker
And there's something strange or something different with our dinner feast this year compared to what was pre-pandemic.
00:02:23
Speaker
Our sour bread was someone—we bought it from someone who quit his corporate job and began selling bread in Instagram because he learned that skill while during the pandemic.
00:02:32
Speaker
Our scented candle was someone who also let go of his corporate job and learned how to make candles during the pandemic and started selling them afterwards.
00:02:42
Speaker
Even I, for one, before going to Hong Kong, I was selling bottled cocktails in social media.
00:02:47
Speaker
And that explains how the Philippine consumption story is just so robust.
00:02:53
Speaker
The demographic trend in the Philippines is a very positive story.
00:02:57
Speaker
But if you look at the employment numbers, the employment figures are above what the demographic trend would suggest by 2.5 million people in 2023.
00:03:06
Speaker
So just imagine there were 2.5 million people working now.
00:03:10
Speaker
In usual cases, they're not supposed to be there.
00:03:13
Speaker
And by 2.5% additional labor, that is a big boost on growth.
00:03:17
Speaker
They are, again, taking advantage of digitalization to make ends meet, to earn extra income, and to smoothen consumption amidst this very struggling world economy.
Philippines: Demographics and Service Exports
00:03:28
Speaker
So you mentioned really two factors which are interesting here.
00:03:31
Speaker
One is demographics.
00:03:32
Speaker
The other one, you hint really at the human capital that the Philippines have.
00:03:36
Speaker
And I want to explore that a little bit.
00:03:37
Speaker
Let's start with demographics.
00:03:40
Speaker
Can you paint us a picture of, you know, how
00:03:43
Speaker
How large is the population of Philippines?
00:03:45
Speaker
Because we need to check every year because it's growing so fast.
00:03:48
Speaker
Where are we at right now?
00:03:49
Speaker
And how would you describe the Philippine demographics and why is it positive for economic growth?
00:03:54
Speaker
We're around 150 million strong Filipinos.
00:03:59
Speaker
We're highly educated, highly literate, and we're, I think, the second best English-speaking economy in Asia.
00:04:08
Speaker
And that alone attracts a lot of investment that pertains into services.
00:04:13
Speaker
We have the BPO sector still strong, still attracting some investment.
00:04:17
Speaker
BPO meaning the business process outsourcing.
00:04:20
Speaker
It's able to attract not just your call center agents, but also your medical services, your financial services.
00:04:28
Speaker
This is an opportunity for the Philippines given the fact that amidst digitalization, services can become more tradable.
00:04:36
Speaker
And the Philippines has a very good position to take advantage of this trend of exporting to the rest of the world through services.
00:04:44
Speaker
So, in favor of demographics, we have enormous human capital, also language abilities.
00:04:52
Speaker
Which are helping the Philippines on the remittances side, of course.
00:04:55
Speaker
I think one-third of global seafarers at one point were Filipinos as well.
00:04:59
Speaker
But then, of course, you have the more digital side that you mentioned that opens up domestically the opportunity to create new businesses, but also the export of services.
00:05:09
Speaker
But let me challenge you a little bit on that, because one of the key revolutions of late has been artificial intelligence.
00:05:16
Speaker
And there's been some worries that that could actually then mean that some jobs get lost if machines can essentially replace, say, somebody in a call center.
00:05:29
Speaker
How real do you think that risk is?
00:05:31
Speaker
And is that an opportunity perhaps for a country like the Philippines?
00:05:35
Speaker
Or is this something that you were worried about if you look at the next few years?
00:05:39
Speaker
Look, AI is like a chef knife.
00:05:42
Speaker
It can make the chef the most productive, most efficient chef in the kitchen, but it can also hurt you.
00:05:48
Speaker
And for the Philippines in particular, it's caught in the middle.
00:05:52
Speaker
It is providing, let's say, jobs that can easily be replaced using AI, but these jobs can also be more efficient with the use of AI.
00:06:02
Speaker
So it's a very big government agenda in the Philippines right now to retool, to rejig the Philippine workforce to make sure that these jobs aren't replaced, but AI is integrated where productivity in the Philippines will just enhance throughout the years ahead.
00:06:16
Speaker
Hopefully, it's able to bring up structural growth rather than bring it down.
00:06:22
Speaker
So that's interesting.
00:06:23
Speaker
So there's obviously productivity enhancements that maybe the Philippines can take advantage of as well and accelerate this process.
Filipino Music's Global Impact
00:06:31
Speaker
And I think particularly in a world where we've labor shortages and developed markets, obviously the Philippines fills a niche, right, with a young population, growing population.
00:06:40
Speaker
And so that's maybe one of the reasons why we have the Philippines growing so strongly, despite not capturing some of the supply chain verification.
00:06:47
Speaker
But before finishing off on the Philippines and moving to Thailand, one quick question.
00:06:53
Speaker
The Filipinos famously are really into music.
00:06:59
Speaker
When you go to the Philippines, you hear fantastic cover bands everywhere.
00:07:04
Speaker
When are we going to see, you know, the world class Filipino boy or girl band emerge just where the Koreans have captured global markets?
00:07:12
Speaker
Isn't it time for the Philippines to produce a world act like that?
00:07:17
Speaker
It is.
00:07:18
Speaker
I think we do have the talent to be able to provide entertainment to the rest of the world.
00:07:23
Speaker
And I would actually point out that Filipino hip-hop is making a mark in the global music industry.
00:07:29
Speaker
So that's something that we need to watch out for.
00:07:31
Speaker
Eminem, the big rapper Eminem, is already working with a Filipino hip-hop artist.
00:07:37
Speaker
So let's see.
00:07:38
Speaker
Let's see where it goes.
00:07:39
Speaker
So there you have it, ladies and gentlemen.
00:07:41
Speaker
The Filipino hip hop is the next big thing.
00:07:44
Speaker
We're going to take a quick break here.
00:07:45
Speaker
When we come back, we're going to talk about Thailand and why durian exports from Thailand are really the next big thing for that economy.
Thailand's Economic Dynamics
00:08:03
Speaker
Well, Aris, we talked about the Philippines.
00:08:06
Speaker
Let's focus on Thailand, the other economy that you're covering.
00:08:09
Speaker
And here, too, it's not an economy that's really in the category maybe of capturing, say, the diversification of electronic supply chains that we see in Vietnam, for example.
00:08:22
Speaker
But clearly, Thailand's growth is also expected to accelerate this year.
00:08:28
Speaker
I imagine tourism is playing a big role here.
00:08:31
Speaker
But what else is there that drives the economy outside a very well-known tourism story?
00:08:38
Speaker
I guess I just have to temper that statement and say that a lot of people right now expect that the potential growth rate in Thailand would actually decrease from before.
00:08:48
Speaker
Potential growth rate back then was around 3.5%.
00:08:53
Speaker
A lot of the multinationals expecting potential growth to be at 2.7% because there are a lot of structural headwinds in Thailand.
00:09:01
Speaker
You have an aging population.
00:09:03
Speaker
You have high household debt.
00:09:05
Speaker
You have export competitiveness potentially deteriorating as the world transitions to EV, to higher tech.
00:09:14
Speaker
So there are a lot of challenges right now.
00:09:17
Speaker
And so far, we expect growth to accelerate not so much because of its structural drivers, but more of the fiscal stimulus that may arrive in 2024.
00:09:28
Speaker
But then again, there are legal risks to the fiscal stimulus that they're planning to do.
00:09:32
Speaker
So we have yet to see the details of whether it will happen or not.
00:09:37
Speaker
I wanted to focus on some of the big, big trends.
00:09:39
Speaker
In Thailand, the demographics are not quite as favorable.
00:09:44
Speaker
Yes.
00:09:45
Speaker
The median age, just as a point of comparison, the median age in the Philippines is 25.
00:09:49
Speaker
The median age in Thailand is between 41 to 43.
00:09:53
Speaker
So in a span of, let's say, 15 years, it is largely expected that Thailand becomes a super-aged society, if that makes sense.
00:10:02
Speaker
And that, of course, would introduce new problems, new fiscal problems, because, of course, if you have more hands consuming rather than working, you need to have savings today to be able to smoothen consumption in the future.
00:10:15
Speaker
So yes, it is quite worrying.
00:10:17
Speaker
But Thailand is taking big steps to make sure that that doesn't really happen.
00:10:21
Speaker
You're looking at increasing VAT from 7% to 10%.
00:10:26
Speaker
You're looking at the BOT trying to bring household debt down.
00:10:30
Speaker
So it is.
00:10:31
Speaker
They're preparing for what's ahead.
00:10:33
Speaker
That's interesting.
00:10:34
Speaker
So Thailand, one of the faster aging economies in Asia, in fact, following Northeast Asia, where we see rapid aging as well.
EV Transition Challenges in Thailand
00:10:42
Speaker
You mentioned EVs, and I wanted to ask you about that, because Thailand has actually been sort of deemed the Detroit of the East, because it's been a major car manufacturer exporter.
00:10:53
Speaker
At one point, one third of Thailand's exports were automotive related.
00:10:58
Speaker
Now, we are facing a revolution in the car industry.
00:11:02
Speaker
We're moving to EV vehicles, new energy vehicles, China famously accelerating its exports.
00:11:08
Speaker
Where does this leave Thailand?
00:11:10
Speaker
Because their entire industrial infrastructure is geared towards combustion engines.
00:11:15
Speaker
And is Thailand going to be able to make that jump towards an EV-led automotive sector, or is there a risk here of them falling behind?
00:11:25
Speaker
It is indeed a fundamental challenge for Thailand, something that authorities are very much well aware of.
00:11:31
Speaker
And for that reason, authorities pulled out this very big investment promotion campaign called EV 3.5, where you provide consumer incentives for corporations who sell to the Thailand market.
00:11:44
Speaker
under the condition that in 2026-2027, they're supposed to be producing the cars that they sell in Thailand itself.
00:11:52
Speaker
And because of this move, you've seen a big jump in FDI in Thailand beginning in 2016, largely sourced from mainland China.
00:12:01
Speaker
Now, we talked about electric vehicles and the challenges of the transition.
00:12:06
Speaker
We talked about the demographics and both of them, some challenges, adjustment challenges for Thailand.
Thailand's Export Trends
00:12:14
Speaker
Let's talk about something more positive, and that is agricultural exports.
00:12:18
Speaker
And you've written about one particular export that has been doing particularly well of late.
00:12:24
Speaker
What is that, Norris?
00:12:25
Speaker
So it is Southeast Asia's king of fruits, durian.
00:12:28
Speaker
So durian market, how much is it growing?
00:12:30
Speaker
It's growing by 400% year on year.
00:12:33
Speaker
And before we start, keep talking about durian.
00:12:36
Speaker
For those who don't know durian, it is a very pungent fruit and to the extent that actually in many hotel rooms in Asia,
00:12:45
Speaker
You see signs in your hotel which says no smoking and then next to it is a no durian sign as well because it leaves that smell.
00:12:53
Speaker
And yet we see that boom because it's the king of fruit and they're shipping it from Thailand to which countries?
00:13:01
Speaker
Thailand is exporting it to China.
00:13:03
Speaker
Vietnam has also started selling durian to China.
00:13:06
Speaker
The Philippines exported its first durian to China in April.
00:13:10
Speaker
So there's this big boom in China right now where if you're engaged or if you're courting your partner, the boy would have to give a durian to its prospective mother-in-law.
00:13:23
Speaker
And because of this new tradition, it increased this boom in
00:13:26
Speaker
in mainland China today.
00:13:29
Speaker
And even to where we are right now, if you could go to the supermarkets, there's always this one section that's just dedicated to durian.
00:13:38
Speaker
And with Thailand providing 90% of the market of durian, it was a big, big, big opportunity for Thailand to the point that durian boomed so much where it is now bigger than rice.
00:13:50
Speaker
Not a small feat knowing that Thailand is the second largest exporter of rice.
00:13:55
Speaker
So I have a suggestion for new analytic indicator for you.
00:13:59
Speaker
If you want to predict Thai GDP growth, look at Chinese wedding numbers over the course of the year.
00:14:06
Speaker
And that'd be a leading indicator, I suppose, during exports and GDP growth in Thailand.
00:14:11
Speaker
That's interesting.
00:14:11
Speaker
That's a reminder that the Thai economy still has enormous potential.
00:14:16
Speaker
It's actually an agricultural exporter in many ways as well.
Post-COVID Tourism in Thailand
00:14:20
Speaker
But lastly, we should talk a little bit about tourism because, of course, that is by many measures probably the largest contributor to jobs in Thailand.
00:14:29
Speaker
I would suspect.
00:14:30
Speaker
I don't have the exact numbers.
00:14:32
Speaker
Clearly worldwide known as a world-class tourist destination.
00:14:38
Speaker
What are you seeing there?
00:14:40
Speaker
Are we seeing the return of tourism after COVID?
00:14:42
Speaker
Is there a regular boom or would our listeners actually be able to travel to Thailand and find still free hotel rooms and so forth?
00:14:52
Speaker
So the tourism recovery story, it doesn't look as good as we want it to be.
00:14:58
Speaker
So just a point of comparison, there were 40 million tourists in 2019.
00:15:04
Speaker
In 2023, it was around 28 to 29 million.
00:15:08
Speaker
And for government forecasts, and even for our forecast, we predict tourism to be around 32 to 35 million in 2024.
00:15:17
Speaker
That is, of course, around 5 million before the 2019 number, before pre-pandemic levels.
00:15:22
Speaker
But
00:15:22
Speaker
It's good to point out that the recovery of non-mainland Chinese tourists are already at around between 90 to 100 percent, while mainland Chinese tourism or tourist arrivals is just at between 40 to 50 percent of pre-pandemic levels.
00:15:38
Speaker
So without its biggest source of tourists, China, just to provide some numbers, is usually one-third of Thailand's tourist numbers.
00:15:50
Speaker
And they are the largest per capita spenders amongst all the other nationalities that visit Thailand.
00:15:57
Speaker
So without this recovery, this full recovery of Chinese tourism, you can't really expect a strong recovery of the general tourism narrative in Thailand.
00:16:07
Speaker
So we have yet to see the Chinese tourists come back.
00:16:11
Speaker
well aris i thank you for this overview i'll be sure to keep pay attention to uh... philippine rap artist and tied durian from now on but it's very inspiring and it's uh... again that it is i think important to uh... shine the spotlight on small economies in asia that still do deliver that acceleration growth this year even as we see uh... some of the large economies actually continue to to to cool at the margin and so
00:16:40
Speaker
Certainly ASEAN, exciting region, and both the Philippines and Thailand, square in the middle of it.
00:16:45
Speaker
So thank you very much, Aris.
00:16:47
Speaker
Cheers.
00:16:52
Speaker
Well, folks, that's it for today.
00:16:54
Speaker
Thank you very much for joining us as always.
00:16:56
Speaker
And of course, if you'd like to subscribe, head to Apple or Spotify or wherever you find your podcasts and simply subscribe to our podcast on a weekly basis.
00:17:05
Speaker
We'll be back next week putting Asian markets and economics in context right here on the Banyan Tree.
00:17:10
Speaker
Talk to you then.
00:17:33
Speaker
Thank you for joining us at HSBC Global Viewpoint.
00:17:36
Speaker
We hope you enjoyed the discussion.
00:17:39
Speaker
Make sure you're subscribed to stay up to date with new episodes.