BMI View: BMI expects the Philippines IT market will grow by around 10% in 2012, slightly slower than in 2011. Over our five-year forecast period, the market should achieve regional outperformer status. The Philippines has lower PC penetration than many other Asian countries and offers correspondingly high growth potential over the forecast period, particularly with support from government ICT programmes.

Headline Expenditure Projections

Computer hardware sales: US$1.96bn in 2011 to US$2.9bn in 2012, +5.2% in US dollar terms. Forecast in US dollar terms downwardly revised due to the expected impact in H112 of and HDD shortage linked to the Thailand floods.

Software sales: US$331mn in 2011 to US$362mn in 2012, +9.4% in US dollar terms. Forecast in US dollar terms broadly unchanged, but growing adoption of cloud solutions by the Philippines BPO industry could provide a new phase of momentum.

IT Services sales: US$815mn in 2011 to US$898mn in 2012, +10.2% in US dollar terms. Forecast in US dollar terms broadly unchanged, with businesses expected to retain an emphasis on getting the most out of existing investments.

Business Environment Rating: The Philippine's score was 42.2 out of 100.0 with low Country Risk ratings dragging down high Potential Returns. The Philippines took 8th place in our latest BER table, but has potential to rise over time due to rising PC penetration.

Key Trends & Developments

Weak export markets could act as a restraint in 2012. However, the recent wage rise for civil servants have helped to facilitate consumer spending on big-ticket items such as PCs. Remittances, a key source of income, held up better than expected during the global economic slowdown and also supported higher consumer spending.

Demand from outside Manila will continue to drive market expansion in 2012. More vendors, such as Lenovo and Toshiba, are signing up new distributors and opening stores nationwide. Cebu is seen as a gateway to provinces in Visayas and Mindanao. Meanwhile, PCs for schools programmes will be another driver for the Philippines computer market.

The government will continue to push an e-government agenda in areas including customs, health, elections and education. Meanwhile the government's digital agenda, aimed at boosting computer penetration, also continued to be implemented.

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