PH more resilient than other countries, says gov’t
Robust domestic demand offsets ill effects of Euro zone crisisBy Michelle V. Remo
Philippine Daily Inquirer
The Philippines is more resilient to the dampening effects of unfavorable developments in the global economy than most emerging markets in the region.
The Philippine government based its claim largely on the strength of domestic demand, which makes it less affected by the anemic demand from advanced economies compared to export-oriented countries in the region.
“The Philippine economy is less susceptible to trade shocks than other EMs (emerging markets),” the Aquino administration said in a report distributed by the Investor Relations Office (IRO) to foreign investors in recent road shows abroad.
The Philippines’ vulnerability to trade shocks, measured in terms of “trade openness,” stands at just about 0.9 percent. This is lower than the vulnerability of other emerging markets in the region, the IRO said, citing the 1.5 percent for Thailand and Taiwan, and the 1.9 percent for Malaysia.
Trade openness is computed as the proportion of current account inflows and outflows to the country’s gross domestic product (GDP). Current account flows are composed of export revenues, import earnings and remittances.
Moreover, the “GDP growth shock” suffered by the Philippines at the height of the latest global economic crisis in 2009 stood at only 3.1 percent. This is lower than the growth shock of 5.3 percent for Malaysia and Thailand and 4.5 percent for Taiwan.
GDP growth shock measures the drag caused by a global economic slowdown on a certain economy.
It is computed as the standard deviation of a country’s GDP growth for a certain year when the global economy weakened, in this case 2009, from its average growth rate in the preceding five years.
The higher degree of resilience of the Philippines to unfavorable developments abroad compared with other emerging markets was said to be due to its heavy reliance on domestic demand, economists said.
Export earnings account for about 30 percent of the Philippine economy, smaller than the over 50 percent for many emerging Asian economies.
Strong domestic demand in the Philippines is credited partly to sustained growth in remittances, which fuel consumption of at least 10 percent of Filipino households.
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