Philippines: Digital economy to hit $35 billion by 2025
National fibre backbone seen giving economy extra oomph, boosting e-commerce
Manila: Despite slow internet, the Philippines's digital economy is expected to hit $35 billion in 2025 – up 45 per cent from $24 billion in 2023, continuing its remarkable climb, according to an industry estimate.
E-commerce has ignited the country’s economy, making it one of the fastest-growing digital economies in Southeast Asia.
As of January 2024, the Philippines boasted 86.98 million internet users, as reported by DataReportal's Global Digital Insights report. The country has sixth-highest number of Facebook users in the world (86.75 million), out of a population of about 119 million.
Huge jump in e-payments
The increasingly ubiquitous use of QR codes for payments has caught fire, thus making it part of the country’s “new normal”, and bypassing the credit card era.
In 2021, as a result of the pandemic, and despite being a laggard in web speed, e-payments have jumped by “more than 5,000 per cent”, according to the Philippine central bank (Bangko Sentral ng Pilipinas, BSP).
In 2022, the internet economy registered a gross value added of about 2.08 trillion pesos, ($36.11 billion) representing 9.4 percent of the nation's gross domestic product (GDP).
E-commerce emerged as a growth leader in economic activity, with an estimated gross merchandise value (GMV) of $24 billion in 2023, a 60 per cent-jump from $15 billion in 2022, based on Statista and eConomy SEA report.
“Slow” internet no more?
The country ranked 86th out of 146 countries in broadband speed, and 49th out of 178 countries for mobile speed, as per a January 2024 Ookla report.
This could change soon.
The first phase of the National Fibre Backbone (NFB) launched on Friday (April 19, 2024) – covers 1,245 km and has an initial optical spectrum capacity of 600 Gbps.
It’s the first of six fibre-optic connectivity being pushed by Manila to hook up the entire archipelago with fibre, allowing for speed-of-light connectivity.
President Ferdinand R. Marcos Jr. led the Friday launch event of NFB Phase 1 in Manila, during which he vowed to push for investments in a "fast and reliable internet across the country" -- which has a total shoreline of 36,289 km.
The multi-billion domestic submarine cable project will also cover Visayas and Mindanao, using 1,800 km of submarine cables – with more than 20 planned "landing stations" across the country.
Once all the six phases are completed, expected in two years (2026), the Department of Information and Communications Technology (DICT), the agency tasked to oversese the project, broadband penetration rate will improve from the current 33 per cent to 65 per cent, reaching 70 million Filipinos out of the current 119 million inhabitants.
It is also expected to lower internet access price to as low as $5 per Mbps. In May 2022, Manila licensed Starlink, allowing satellite broadband internet for islanders. But with no payment plan currently, most would-be end-users find the $500 up-front cost of a basic kit (dish and router) prohibitive.
750,000 beneficiaries of direct internet access in Regions I, III, and Metro Manila
3,000 – Free Wi-Fi sites to be hooked up to the NFB
1,245 km – Length of the Phase 1 of NFB
600 Gbps - initial optical spectrum capacity of the backbone
346 - number of government offices connected to GovNet to be served by NFB.
145 million pesos – potential savings estimated annually from NFB.
28 – number of Phase 1 “nodes” (physical access points where different networks connect to the backbone)
14 - number of provinces in Northern and Central Luzon covered by Phase 1
5 - more phases to be added to NBF project, all set for completion by 2026
$5 - (275 pesos) price per Mbps of internet speed with NFB
4 – number of “ecozones” under the Bases Conversion Development Authority (BCDA), to be served by the fibre backbone
2 - number of National Government Data Centers connected to it
What 'high-speed backbone' means
The backbone’s first phase, now serving Luzon (an island three times the land area of the Netherlands) in the Philippines, is a significant step.
The NFB forms part of the National Broadband Program (NBP), pushed by the DICT, playing a vital role in harnessing the digital economy.
Manila is investing directly in communication infrastructure in collaboration with the private sector to bridge the digital divide. The NFB will primarily serve various government offices, data centres, and communities, particularly in Northern and Central Luzon, with substantial savings.
The ultimate test of the NFB is how many of the country's 7,640 islands would indeed gain access to fast internet. The president asked for "perseverance", innovation, and collaboration to achieve this goal and foster inclusivity.
It's an on-going challenge. But given the frenetic pace of digital infrastructure build-up, access to high-speed internet for millions outside the major metropolises would indeed be a godsend.
Economic outlook
In terms of economic outlook, projections indicate growth between 6.0 per cent and 7.0 per cent for 2024, after hitting a higher-than-expected rate in 2023.
Looking ahead to 2025, the target growth range has been narrowed to 6.5 per cent -7.5 per cent from the initial projection of 6.5 to 8 per cent, as highlighted by National Economic Deveopment Authority chief Arsenio Balisacan in a media briefing.
Growth projections for the years 2026 to 2028 remain unchanged at 6.5 per cent to 8.0 per cent.