PH among Asia’s ‘striving tiger cubs’ as it plays economic catch-up

MANILA  -The Philippines is among “Asia’s striving tiger cubs” that are likely to be the fastest growing economies this decade, according to Nomura Global Markets Research.

In its “Asia Macro Outlook 2024” report released Wednesday, Japan’s biggest investment bank named the Philippines, India and Indonesia as the economies poised to corner the biggest foreign direct investments (FDI) in the coming years, which should help them supercharge their economies.

“They have been scaling up structural reforms to address infrastructure gaps, strengthen regulations and improve competitiveness,” Nomura said.

“With ample room for economic development catch-up and superior working-age populations, these economies are poised to attract stronger FDI and portfolio inflows, potentially setting off a virtuous cycle where higher investment leads to stronger economic growth, which in turn attracts more investment,” it added.

The Philippine economy snapped three consecutive quarters of sluggish growth after expanding 5.9 percent in the July to September period.

Saving grace

What saved the economy from another slowdown was government spending, which grew by 6.7 percent during the quarter, going largely to infrastructure. That uptick reversed the 7.1-percent contraction in the second quarter and was responsible for 36 percent of gross domestic product (GDP) growth in the third quarter, thanks to recent government efforts to compensate for underspending.

As GDP growth averaged 5.5 percent in the first three quarters, the economy would have to expand by 7.2 percent in the fourth quarter to attain at least the low end of the government’s 6 percent to 7 percent target for this year.

National Economic and Development Authority Secretary Arsenio Balisacan said the Marcos administration could still hit its growth ambitions this year, adding that government spending still has room to grow in the final quarter.

‘Sub-par’ growth

Nomura said that while it expected “growth improvement” this year, the expansion would be “sub-par” as inflation and high interest rates crimp consumer spending, a traditional growth driver.

In its report, Nomura forecasts Philippine economic growth to hit 5.2 percent in 2023, before accelerating to 5.8 percent next year. If the prediction comes true, it would miss the Marcos administration’s 6.5 percent to 8 percent growth goal.

Public investment spending should pick up the slack from weak household consumption, the Japanese bank said, noting the government’s flagship infrastructure projects and catch-up spending plans “should also be sustained ahead of the May 2025 midterm elections.”

“By contrast, the persistence of an uncertain inflation outlook and sustained elevated interest rates (more below) will likely weigh on household spending growth, but not cause it to plunge, given low household debt at around 10 percent of GDP,” Nomura said.