HSBC: PH may be doing well, but vital reforms still needed


The Philippines may be doing well economically, but it still needs to undertake more reforms to fill the vital infrastructure requirements of the country—something public-private partnership (PPP) programs can not fully cover, economists from British banking giant HSBC said.

In a briefing Tuesday, Frederic Neumann of HSBC’s Asian economic research unit said that the challenge now facing Asia is for the region to make economies more efficient.

“Productivity growth is one of the keys to avoid a hard landing when liquidity dries up at some point in the future. And here, the Philippine government has done some progress. But across the region, we haven’t seen big structural reforms,” he said.

In the case of the Philippines, Neumann said demographics and education trends were showing that the country had a great potential.  In a report issued last year, HSBC predicted that the Philippines could become the 16th largest economy in the world by 2050.

“But that’s the promise, that’s not destiny,” Neumann said, adding the country would sow what it would reap.

“We’re at the sweet spot, but delivering the right policies will take us there,” he said.

Trinh Nguyen, HSBC economist for Southeast Asia, added that the Philippines was “one of the greatest comeback stories” in the region.

This year, HSBC sees the Philippines growing by 5.9 percent and inflation averaging at 3.6 percent.

HSBC also expects the Bangko Sentral ng Pilipinas to keep its key policy rates at 3.5 percent, but it also sees further rate cuts on the special deposit accounts (SDA).

The economist said that the peso could settle at 39.50 to the US dollar by yearend.

But the Philippines needs to address weak infrastructure such as high cost of power, to boost inflow of foreign direct investments, she said.

“In a way, it’s a victim of its own success story. When you have high economic growth you also have higher infrastructure requirements,” she said.

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  • w33k3nd3r

    Yeah, like one of those reforms ought to be strict separation of Church and State which isn’t anywhere present.

  • carlcid

    There needs to be more transparency in corporate governance. The Philippine stock market is still byzantine in nature. Minority stockholders are ignored, if not held in contempt. And insider trading and price manipulation is more of the norm than the crime that it should be. As it is, the Philippine stock market is more of a casino, instead of a forum for investing one’s hard-earned money. There are very few companies which look out for the small shareholder. Most are controlled and run by predators who are only looking out for themselves.

  • Hayek_sa_Maynila

    Less than a week ago, after BSP cut the SDA rate to 2.5%, HSBC’s Nguyen said this:

    “Given that they took drastic measures (on SDA) at this meeting, we do not expect any movement at the April meeting,” said Trinh Nguyen, economist at HSBC in Hong Kong.

    However in this Wednesday March 20, 2013 issue PDI reports :

    “HSBC …also sees further rate cuts on the special deposit accounts (SDA).”

    Does this mean the HSBC’s thinks that BSP will not cut the SDA rate on their April meeting but will still cut them in any of the remaining meetings before the end of 2013? Or is there an outright retraction from the assessment last week? Hmmmm…

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