PH seen to be ahead of regional peers
The Philippines may have been the hardest hit of all Southeast Asian countries by the recent volatility in financial markets. But rating firm Moody’s Investor Service expects the Philippines to weather the recent storm relatively well compared to its neighbors, as robust domestic demand counters the effects of weak demand for exports.
A report released by Moody’s this week echoed the International Monetary Fund’s (IMF) view on the region’s economic prospects. It said the Philippines is in a unique position to outperform its neighbors.
“Headwinds from lackluster global demand, particularly out of neighboring China, will weigh on the outlook. Thailand, Singapore, Indonesia and Malaysia all recorded slower growth in the first quarter thanks to mediocre export demand,” according to a report from Moody’s Analytics, the rating firm’s research arm.
“The Philippines, meanwhile, continues to expand at a breakneck pace as the surging domestic economy has more than offset the weakness in the export sector.”
Earlier, the US Federal Reserve announced the gradual withdrawal of its stimulus initiative. The announcement rocked the markets across the region.
“Investors are now starting to liquidate their positions in line with the withdrawal of monetary stimulus from the US and eventually Europe,” Moody’s said. “This will continue to put downward pressure on exchange rates and equity markets.”
However, Moody’s said the capital flight may have a silver lining for Southeast Asian markets as weaker currencies make the region’s exports more competitive. Countries in the region have also learned their lesson from the 1997 Asian financial crisis, Moody’s said, saying that countries like the Philippines enjoy current account surpluses.
Southeast Asian policymakers have also maintained a healthy level of reserves that can counter tightening credit conditions in case of a large-scale outflow of funds, Moody’s said.