Eco managers brush aside effects of China slowdown

MANILA, Philippines - Philippine economic managers believe that the impact on the Philippines of the decision of China to lower its economic growth target to 7.5 percent instead of eight percent this year would only be temporary and would serve as an opportunity for exporters and manufacturers to step up their operations.

Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr. said in an interview with reporters that the negative impact of the lower growth projection in China on the financial markets in the region including the Philippines was only temporary.

“The impact on financial markets of a slower growth target would be temporary and once that has been absorbed I think the markets will realize that that is still significant growth for a huge economy like China at this time,” he stressed.

Last March 5, China pared its economic growth target to 7.5 percent from an eight percent goal in place since 2005 as it tries to rebalance its economy by cutting its reliance on exports and capital spending in favor of consumption.

“At this time 7.5 percent GDP growth is still very respectable even for a very fast growing economy like China,” Tetangco added.

He pointed out that China has been growing faster than what the government has normally predicted and posted double-digit growth rates when it was expecting single-digit growth.

“It is entirely possible, so if that is the case then there won’t be any significant impact given that it has been the expectation by many that there will be deceleration in economic growth including the economic growth in China,” he said.

He added that investors are also concerned about the situation in Greece whether European leaders would be able reach a bail out agreement soon.

For his part, National Economic and Development Authority assistant director general Ruperto Majuca pointed out that the government has anticipated an economic slowdown in China as early as last year.

“NEDA has been watching closely and vigilantly and monitoring the external developments. Since last year we have already anticipated China slowdown, the reason for this is China’s economy is unbalanced right now,” Majuca said.

According to him, China is unbalanced as it depends heavily on investments that account 50 percent of its domestic output.

“This high investment rates is unsustainable and we are anticipating that they will slow down as they rebalance their economy and make it more consumption based rather than investment based, get more exports, and reduce their imports,” he explained.

The NEDA official said the projected slowdown would serve as an opportunity for manufacturers and exporters to ship more products to China.

“We have predicted last year was that there will be a slowdown but at the same time because of the increase in imports that is an opportunity for Philippine exporters to take advantage of that and for the manufacturers,” Majuca said.

Although China is slowing down, Majuca added that NEDA is not worried because of the higher imports that could benefit Philippine exporters.

 “The slowdown is negative but the impact for us for higher exports is positive. On the balance it is more positive for us so it is an opportunity really and we don’t anticipate China will go back to double digit growth in the next five years or so because of its restructuring,” he said.