The Philippines is now Southeast Asia’s main economic engine, fueled by strong domestic demand, to lead the rest of the region ahead of Asia this year, rating firm Standard & Poor’s (S&P) said.
While growth across Asia will continue to be dragged by worsening economic conditions in China and the tepid recovery in the US and Europe, S&P said in a report this week that strong domestic demand would allow Southeast Asia’s major markets to fare better than their trade-dependent peers.
S&P said Indonesia, Malaysia, Philippines, Singapore and Thailand were expected to grow collectively by 5.5 percent this year. This is faster than the rating firm’s 5.3-percent growth forecast for Asia Pacific as a whole.
“These economies are more domestically focused than the newly industrialized economies and therefore tend to do better when global growth is sluggish,” the report said.
S&P said the Philippines would stay ahead of its neighbors in the region, given its lowest reliance on exports compared to others in Southeast Asia.
“The Philippines, which S&P recently upgraded to investment grade, has taken over the Asean growth leadership role from Indonesia,” the firm’s report said. “We project Philippine gross domestic product (GDP) to expand by almost 7 percent this year, moderating to 6-6.5 percent in 2014 and 2015,” S&P said. The firm’s growth forecast for the Philippines this year matched the top end of the government’s target growth of 6-7 percent.
S&P said the biggest threat to the Asia Pacific’s growth was the performance of the Chinese economy, which is expected to grow below the government’s official target of 7.5 percent partly as a result of a credit crunch that has choked businesses and households.