Robust domestic demand seen to shield PH from external shocks

SUSTAINED manufacturing growth on the back of robust domestic demand would help shield the country from external shocks amid a slower global economy, according to the Department of Finance’s chief economist.

“The robust manufacturing sector is an indication that our domestic economy can withstand the impact of external volatility. Despite the slowdown of our major trading partners and continued oil price crisis, the country managed to stabilize our major economic indicators,” Finance Undersecretary Gil S. Beltran said in an economic bulletin.

The growth in manufacturing output, as measured by the Volume of Production Index or VoPI, jumped 34.3 percent in January—a six-year high, National Economic and Development Authority (Neda) data showed.

Neda said it was expecting the manufacturing sector to “grow more strongly for the year ahead,” partly due to election-related spending ahead of the national polls in May.

But it was a different story for exports, which slid for the 10th consecutive month in January—an indication of sluggish global trade for the rest of the year.

For Beltran, “the continuation of public-private partnership [PPP] projects and enforcement of free trade agreements that will provide more conducive business environment to attract local and foreign investors are essential to sustain the positive economic growth.”

The Bangko Sentral ng Pilipinas (BSP) shares the same view that amid prevailing external risks, the country should continue to rely on its domestic strengths to sustain economic expansion.

“Even as domestic demand is seen to remain firm, the Fed move means for us a greater need to consider domestic sources of growth, given an apparent global fragility,” BSP Governor Amando M. Tetangco Jr. told reporters in a text message last week, in response to the US Federal Reserve’s move to keep policy rates steady.

“Our current stance of monetary policy remains appropriate but we have flexibility. There is also ample fiscal space,” Tetangco said. The Monetary Board—the BSP’s policymaking body—will meet this week to discuss monetary policy.

Tetangco said “we continue to see no pressing need to change the stance of monetary policy at this time.”

Separately, a report released by the research arm of Manila-based multilateral lender Asian Development Bank (ADB) showed that the Philippines is one of the Asean economies that would be most impacted by a slowdown in China’s economy in the next five years.

“In Southeast Asia, the Philippines and Malaysia would be hardest hit, with GDP [gross domestic product] growth slowing down by more than 0.4 percentage points, due to their strong trade linkages with China” in 2016-2020, according to an ADB Institute working paper titled “Impact of the People’s Republic of China’s Growth Slowdown on Emerging Asia: A General Equilibrium Analysis.”  Ben O. de Vera