Phl enters golden demographic era (Philippine Star)

MANILA, Philippines – The Philippines is entering a golden demographic era where half of its population will be below 24 years old, thus opening up opportunities for wealth businesses to thrive. A report by the Hongkong and Shanghai Banking Corp. (HSBC) expects the Philippines to enjoy higher growth versus average and benign inflation.

“Long term prospects, however, are still very much dependent on infrastructure spending the government intends to do with the private sector through public private partnerships or PPP,” it said.

Nevertheless, the Philippines and the rest of the Asean is on its way to become one of the world’s leading consumption hubs, fuelling demand for a variety of goods and services, including financial.

According to HSBC Retail Banking and Wealth Management Philippines head Gigi Pio de Roda, the economic boom of the Asean is resulting in the emergence of a new middle class, heralding vast opportunities for global wealth management.

“We believe Asean’s middle class will play an increasingly important role in the shift in the balance of global demand over the next few decades, opening up new and unprecedented opportunities for the region and the world,” Pio de Roda said in a report.

With about 600 million people, Asean countries represent only half of India’s population but collectively generate a larger gross domestic product. By 2020, Asean GDP is expected to grow at an annual average of six percent and reach $4.7 trillion.

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By 2020, Asia is likely to contribute to more than half of the total global middle class population, with Asean accounting for more than $2 trillion of new consumption, according to the International Monetary Fund. Half of Asean’s projected population will be aged under 303.

With growing purchasing power come greater aspirations among Asean consumers, driving stronger demand for property, cars, quality education and healthcare as well as financial services and wealth management, the HSBC wealth management head said.

Consumption patterns in Asean, however, are not even across this expansive and diverse region.

“We expect consumers in developing economies to continue directing a large portion of their disposable income towards improving general living standards while those in mature markets will forge ahead in consumption and investments,” Pio de Roda said.

She said that discretionary spending by more affluent middle class populations in Singapore, Malaysia and Thailand is far more pronounced in the region while spending in Indonesia and the Philippines is focused on vehicles, appliances and education services to enhance quality of life.

While Vietnam has the highest rate of credit card ownership, its emerging middle class is only starting to develop an appetite for luxury goods.

The HSBC report indicated that as populations across Asean become more affluent and the region’s emerging middle class continues to expand, there is a pressing need for services that will help individuals and families preserve, protect and perpetuate their newly found prosperity.

As Southeast Asian populations age, they will need new channels to save for retirement, fund rising costs of healthcare and ensure adequate insurance protection in the absence of well-established social security systems.

“We expect financial wealth in Asean to grow even faster than in China over the next five years, creating opportunities in international wealth and asset management,” she added.

Asean has one of the highest saving rates in the world at around 30 percent and international reserves amounting to $800 billion.

While financial assets remain heavily concentrated in cash and in some markets, concentrated on single assets such as stocks, HSBC expects investment behavior among Asean savers to eventually build a diversified portfolio of assets and move away from home biases.

“We see a future where wealth growth, protection and financing retirement, education and lifestyle needs will become priority goals for Asean consumers. It is critical that financial solutions are designed to meet these long term saving needs, offer transparency and fair value. It is important that consumers have access to timely and relevant market information to help them make informed investment decisions either through self-directed channels or through qualified advisors,” Pio de Roda explained.

There is also a need to ensure banking and wealth management cater to new consumer behavior.

“As the new Asean working class gains greater financial independence, they seek new experiences through travel, education and employment opportunities overseas. They are also among the most active online users, accessing news and information, doing their shopping and conversations virtually given social media’s deep penetration in the region, particularly in Indonesia, the Philippines and Vietnam,” she added.