S&P rules out repeat of Asian financial crisis

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Asian economies have gotten stronger and are now better equipped to deal with volatility in financial markets caused by the repatriation of foreign funds that flowed into the region over the past four years.

According to debt watcher Standard & Poor’s (S&P), a repeat of the 1997 Asian crisis that saw economies in the region crashing was unlikely. S&P added that growth countries like the Philippines, which rely on domestic demand to drive economic expansion and enjoy a surplus of foreign exchange income, would not be derailed.

S&P described two types of external macroeconomic risks, namely “growth” risks and “external financing” risks. Growth risks stem from the openness of the economy.

“The key metric is the ‘growth beta,’ or an economy’s sensitivity to GDP growth in other (major) economies and regions,” S&P said in a statement released this week.

S&P said smaller, more open and more trade-dependent economies in Asia such as Singapore and Hong Kong have higher growth betas, or risks to growth. “In contrast, the larger, more domestically driven economies such as China, India, Indonesia and the Philippines have lower growth betas,” S&P said.

On external financing risks, S&P said economies that run current account deficits, or markets that earn less dollars than they need to spend.

A country’s current account summarizes what is spent on imports, as well as income from exports and services. Overseas Filipino workers’ (OFW) remittances are also counted in the current account.

In the first quarter of the year, the Philippines booked a current-account surplus of $3.44 billion, better than the $393 million posted in the same period last year. This compares to Indonesia’s current-account deficit of $5.27 billion in the first quarter of 2013.

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  • TruthHurts

    “a repeat of the 1997 Asian crisis that saw economies in the region crashing was unlikely”

    But it’s already beginning again; even China is already feeling the slow demand for its exports (even its local demand is worse). Despite an amazing growth record, China and other developing Asian countries like the Philippines are still relatively poor countries in terms of their standards of living. There is a strangled domestic demand all over. People are afraid of the uncertain future. Whatever policies we adopted, it’s not enough to convince people to save less and spend more. Only an increase in domestic demand will allow Asia to become less reliant on exports and avoid the volatility when foreign trading partners suddenly change their minds and leave these countries like abandoned, devastated, used Geishas and Yijis.

    • Reinier Jagdz

      That’s why I like the way our economy is trending towards. Being domestic driven. We don’t need to be beholden to fickle and opportunistic hot money we shall be a solid pillar for ourselves.

    • Chrisnadal19

      the Asian crisis of 97 is different from today, especially for PH. it’s more like 2008 impact, we could see growth deceleration but no huge depreciation for the peso.. every time the peso, the better for OFWs and BPOs, the growth drivers of the economy.. the wild card would be inflation and possible rise of bad debts.

    • Pong_Je

      YOu’re talking about overnight transformation. Philippines is only beginning. nagumpisa pa lang kaya relax ka lang at darating din tayo dyan kong papalarin.

  • http://www.yellowmythbusters.gov.ph/ Weder-Weder Lang

    Fingers crossed.

    • Reinier Jagdz

      At least you’re more balanced in this post.

      • Tommy

        Pretty sure he means fingers crossed that the ASEAN financial crisis repeats itself.

      • Chrisnadal19

        agree.. weder-weder is one of those negastars.

      • Reinier Jagdz

        Silly weder-weder. If a financial crisis or the the great depression happens again he will probably throw a party.
        That’s ok you can be negative just as long as you are balanced in your outlook. don’t be sooooo extremely nega.

  • blue_57

    Last May, when the market reached 7000+, I do not believe the Pnoy should be given credit. Now that the market continuously goes down, I still don’t believe Pnoy has something to do with it.

    • Pong_Je

      Hindi ka parin BELEB sa President MO! Compare mo naman sa mga Presidenteng dumaan at magisip ka.

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