Robust domestic demand and cheap oil are seen keeping the Philippines on its growth path even as its export-reliant neighbors are expected to feel the crunch from slower global trade, debt watcher Moody’s Investors Service said yesterday.
“Against a backdrop of subdued global demand, the growth prospects of Asean’s major export-oriented economies—Singapore, Malaysia and Thailand—will remain weaker than those of more domestic demand-driven economies, Indonesia and the Philippines, in 2016 and 2017,” Moody’s said in its “Inside Asean” report.
Moody’s expects the Philippine economy to expand by 6 percent both this year and next year, faster than the growth projections for Indonesia, Malaysia, Singapore and Thailand, although slightly outpaced by Vietnam. The debt watcher’s forecasts, however, were below the government’s economic growth targets of 6.8-7.8 percent in 2016 and 6.6.-7.6 percent in 2017.
It helped that the Philippines was not heavily reliant on exports, Moody’s said.
“Export growth is slumping across the region; however, the overall economic impact will vary based on the relative importance of trade to GDP (gross domestic product). Total trade (the sum of exports and imports) accounts for 346 percent, 131 percent and 130 percent of GDP in Singapore, Malaysia and Thailand, respectively—much higher than Indonesia (41 percent) and the Philippines (58 percent),” it noted.
In January, sales of Philippine-made goods overseas slid 3.9 percent year-on-year to $4.187 billion, the latest government data showed. Since April last year, the country has been posting monthly year-on-year declines in export revenues, with January’s drop the fastest in three months.
Moody’s said Malaysia, Singapore and Thailand were “susceptible to a prolonged period of subdued global demand via both the export channel and weaker investment demand.”
“By contrast, economic expansion in Indonesia and the Philippines will likely strengthen in 2016 and 2017, with domestic demand providing the main engine of growth,” Moody’s said.
In the case of the Philippines, Moody’s noted that “gross fixed capital formation growth is accelerating rapidly” here.
Also, “lower oil prices have provided greater lift to economic growth in the Philippines, with household consumption growing in excess of 6 percent for only the second time over the past 25 years.”
Economic managers, however, had warned that cheap global oil prices also pose risks to remittance flows from as well as jobs of Filipinos abroad.
In both the Philippines and Indonesia, “public investment contributed to the pickup as governments in both countries sought to gain further traction in developing much-needed infrastructure,” Moody’s said.
Government expenditures on public goods and services reached P2.231 trillion last year, up 13 percent year-on-year, although 13 percent below the P2.559 trillion that the government was programmed to spend. Ben O. de Vera