The Philippines should be cautious not only about the effects of the crisis in the eurozone but also about the possibility of a slowdown of China.
This was according to Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr., who also said that China, over the last few years, had significantly increased its contribution to the growth of other emerging countries in Asia, such as the Philippines.
A hard landing of China, which has been registering the fastest growth rate in recent years, could have a significant dampening effect on the Philippines.
For one, China is a source of foreign investments. It also has become a major export market for products from the Philippines and other emerging economies.
Latest data from the National Statistics Office showed that in October, China was the third-biggest market for Philippine exports, accounting for $568 million, or 14 percent of the Philippines’ export receipt for the month.
“China has been a contributor to economic growth of other countries, so if there will be a slowdown there, then the performance of other economies will also be affected,” Tetangco said.
Latest data on China showed that in the third quarter, its gross domestic product posted an annual growth rate of 9.1 percent, which is considered very fast especially if compared with the anemic growth of industrialized countries in the West. The United States has been growing just a little above one percent, while eurozone economies posted below one-percent growth.
The 9-percent growth rate of China in the third quarter came after growing by 9.5 percent in the second quarter and 9.7 percent in the first quarter.
There is a concern that the very robust growth rates of China may not be sustainable and may be followed by a deceleration starting 2012.
This concern is partly based on rising inflationary pressures that come along a growing economy. Sharp increases in prices of goods and services, a consequence of increasing incomes and demand, may dampen investments and consumption which, in turn, may cause a slowdown.
Tetangco said the possibility of a hard landing for China could not be ignored. Nonetheless, he said efforts of Chinese economic officials to temper the slowdown had been giving relief to countries that were partly dependent on China.
He said that for the Philippines to avoid substantial adverse effects of unfavorable factors in some external markets, the country should continue diversifying its export markets and its sources of investments.