UK think tank: US-China spat won’t drag down PH growth

Economies with robust domestic demand, hence not too dependent on external trade, like the Philippines and India would come out unscathed from the trade war between the United States and China, UK-based Oxford Economics said.

“We expect US-China tensions and the resultant slowdown in Chinese demand to weigh significantly on Asia-Pacific’s growth, especially in Hong Kong, Singapore, Taiwan, South Korea and Malaysia, where trade ties with China matter greatly. But India and the Philippines, which have less trade with China, will hardly be affected,” Oxford Economics economists Louis Kuijs and Priyanka Kishore said in a Nov. 20 report titled “2019 outlook still positive despite US-China trade spat.”

As such, “the more inward-looking economies—India and the Philippines—should remain growth leaders” in the region this year, Oxford Economics said.

Oxford Economics expects the Philippines’ real gross domestic product (GDP) to grow by 6.3 percent this year before slowing to 6.1 percent in 2019 and 5.7 percent in 2020.

The growth forecasts were below the government’s target ranges of 6.5-6.9 percent in 2018 and 7-8 percent starting next year until 2022.

For 2018, growth in emerging Asia-Pacific would be led by India, whose GDP growth Oxford Economics projected at 7.6 percent, followed by Vietnam’s 6.9 percent and China’s 6.5 percent.

Oxford Economics said the growth outlooks for India and the Philippines both had “deteriorated over the last six months, as eroded investor confidence in twin-deficit economies has coincided with domestic turbulence—renewed financial sector stresses in India and rapidly rising inflation in the Philippines.”

As food and oil prices soared, inflation hit over a nine-year high and averaged 5.1 percent in the 10 months to October, above the government’s 2-4 percent target range.

Oxford Economics sees full-year headline inflation rates in the Philippines hitting 5.3 percent this year before easing to 4.3 percent in 2019 and 4 percent in 2020.

But since the Philippines, India as well as Indonesia remained among the fastest growing economies globally, “this should reinforce investor faith in these countries and lead to foreign exchange gains, despite rising rates in most advanced economies,” Oxford Economics said.