Philippines seen to remain more resilient than peers in Asia

MANILA, Philippines—British banking giant Standard Chartered sees the Philippines staying “more resilient” than other Asian economies in 2012 on the back of strong domestic demand and investment.

In its global outlook titled “Global Focus—2012 Fragile West, resilient East,” a chapter on the Philippines said Stanchart was expecting the domestic economy to grow by 3.8 percent for the full year and by a modest 3.2 percent next year, as the Western economic outlook deteriorates further.

The country’s gross domestic product is seen growing at a faster clip of 5.3 percent in 2013 and 5 percent in 2014.

The easing of inflation next year is also seen giving the Bangko Sentral ng Pilipinas more room to cut rates if external headwinds intensify. But Stanchart said that given that the current policy rate of 4.5 percent was already low, it was not expecting more than 50 basis points of interest rate cuts next year.

“The main pillars of support for the economy in 2012 will be private consumption and government spending and investment. Consumption will continue to be supported by solid inward remittances from overseas workers. Government spending/investment is expected to gather pace, after falling short of expectations in 2011, as public-private partnership (PPP) infrastructure projects get underway in 2012,” the research said.

The bank said there were likewise growing downside risks, both onshore and offshore.

“The export sector is unlikely to recover until at least the second half of 2012 as external demand takes time to resume; manufacturers are also recovering only slowly from the supply-chain impact of the Japanese earthquake,” the research said.

Stanchart expects exports—especially of electronics, which accounted for 60.4 percent of the 2010 total receipts.

The research noted the launching of the governments P72-billion fiscal stimulus plan in October to contain the negative impact of the escalating economic crisis in the West.

“We expect some tail effects to carry over into 2012, helping to stimulate economic growth,” it added.

“Inflationary pressure is likely to ease in 2012 as the impact of higher oil and food prices—the two main drivers of inflation in 2011—dissipate further, partly on the back of weakening global demand,” it said.

On the fiscal side, Stanchart said the government debt burden should continue to decline gradually following the government’s adoption of a zero-based budgeting method to manage expenditure. It noted that the country’s public debt ratio was low among Asian peers, at 44 percent of GDP.

“The government needs to stay on the fiscal consolidation path by improving the efficiency of tax collection and revenue generation, and by better utilizing government spending to fuel economic growth,” it said.