Before moving to exchange-traded funds (ETFs) that will offer you exposure to the Philippines, let’s first go over what’s taking place in the Philippines from an economic standpoint. In the second quarter, gross domestic product (GDP) growth came in at 5.6%. This was primarily due to increased government spending and strong domestic consumption. For fiscal year 2015, the Philippines government previously announced an expectation of 7-8% GDP growth. That would be exemplary, especially in this global economic environment. However, GDP is more likely to come in somewhere between 5% and 6.5% due to a decline in exports, a slowdown in China and a worsening El Nino pattern.

The two first points are somewhat related as China is the third largest export nation for the Philippines. In regards to the last point, drought conditions will lead to more failed crops, which will lead to reduced income for farmers and then reduced consumer spending. Farming represents 11% of GDP in the Philippines, and more than half the population lives rurally. (For more, see: Emerging Markets: Analyzing the Philippines' GDP.)

The Good News

The good news is that the Philippines government is reported to be more prepared for El Nino than in 1998 by importing food and remittances from workers abroad, and the economy has been resilient to China’s slowdown thanks to domestic consumption and a strong performance in the services sector. Additionally, inflation was reported at just 0.6% in August. This should keep the price of food in check. That said, there hasn’t been much rain as of late, which limits the country’s economic growth potential.

Along with Nigeria, Qatar, Vietnam, Bangladesh, India and China, the Philippines is one of the fastest growing economies in the world. Fortunately, it doesn’t have the same problems as China. On the other hand, there are likely to be a few headwinds in the near future. (For more, see: 5 Things to Know About the Chinese Economy.)

From an investment standpoint, the most likely scenario is that the Philippines outperforms the majority of the world in regards to growth, but it’s still doesn’t offer a ton of upside potential due to an approaching global deflation and the risk of contagion. If you’re looking to invest for the long haul and you don’t want all to deal with all the shenanigans that take place in China, then the Philippines is worth considering. To do so, you can use an ETF.

ETFs With Philippines Exposure

The two ETFs to look at are iShares MSCI Philippines (EPHE) and PowerShares DWA Emerging Markets Momentum Portfolio ETF (PIE). The former should offer more potential. It’s 99.64% exposed to the Philippines whereas PIE only offers 13.62% exposure and is tied to many other emerging markets that have their fair share of problems at the moment, including Brazil, China and Russia. (For more, see: The Risks of Investing in Emerging Markets.)

EPHE tracks the performance of the MSCI Philippines Investable Market Index. It has slid 4% over the past year and comes with a relatively high expense ratio of 0.62%. There is an average of 368,705 shares traded daily, which isn’t highly liquid, but liquid enough to move in and out of a position at the prices you want. EPHE has net assets of $236.56 million and currently offers a dividend yield of 0.95%.

If you want more diversified exposure to emerging markets with the Philippines mixed in, then you can look at PIE. It has depreciated 11.87% over the past year and comes with a higher expense ratio of 0.95%. It’s also not as liquid, with an average of 218,874 shares traded daily. PIE has net assets of $188.24 million and currently yields 0.66%. (For more, see: Five Minute Guide to Philippines ETF Investing.)

The Bottom Line

The better option between the two ETFs above appears to be EPHE despite the lack of diversification. Economically, the Philippines should outperform most economies throughout the world over the next few years, but that’s only relative as the situation should be “not as bad” as opposed to “good.” If you’re thinking of investing for the long haul, as in at least five years, then you might want to give the Philippines serious consideration. (For more, see: This Asian Nation Is Poised for Steady Growth.)

Dan Moskowitz does not have any positions in EPHE or PIE.