Amid a bleak economic backdrop, the Philippines and the rest of Asean 5 have emerged to become the world’s “bright spots,” according to Moody’s Analytics.
The economic research firm cited rising investments and strong household spending among the five member states of the Association of Southeast Asian Nations, which kept their growth rates robust while the global economy struggled.
In its latest report titled “Asean Outlook: Shining through the Gloom,” Moody’s Analytics said the fine performances of the Philippines, Indonesia, Malaysia, Thailand, and Singapore would partially offset the adverse effects of unfavorable developments overseas.
The research firm, a sister company of credit watchdog Moody’s Investors Service, also said enabling policies would allow investments by domestic firms and spending by households to continue to rise.
The policies include appropriate interest rates to be set by their respective central banks and higher state spending.
The resulting increase in domestic investments and consumption, in turn, will offset the drag caused by an anemic global demand on export earnings of the Asean 5, Moody’s Analytics said.
The firm projected that Asean 5 would grow by an average of 5 percent this year. The figure is below the region’s potential growth rate, it said, but it would be much favorable than the forecasts made for more advanced economies.
The euro zone is expected to enter a mild recession this year due to sovereign debt and banking problems.
“Asean remains a bright spot amid the downbeat global economy. The Asean 5 … have shown resilience as strong investment and household spending have helped to cushion the impact of weaker global growth,” Moody’s Analytics said in the report.
“The Philippines is enjoying a boost from government spending, as well as strong private sector investments in the services industry,” according to economists Katrina Ell and Fred Gibson, authors of the report.
The Philippine government’s own economic forecast for this year stands at between 5 and 6 percent—about the same as the projection of Moody’s Analytics.
In the first quarter, the Philippine economy, measured in terms of gross domestic product, grew by 6.4 percent from a year ago. This was faster than the 4.9 percent registered in the same period last year. It was also the second fastest growth rate in Asia for the period following China’s 8.1 percent.
According to Moody’s Analytics, the outlook for export revenues of Asean 5 is lackluster. It said the prolonged debt crisis in the euro zone, a major export market, would continue to dampen demand for exports from Southeast Asia.
“The big worry is the toll that Europe’s crisis will have on US and Asian demand. A severe downturn in Europe would weaken exports further and stifle foreign investments,” it said.