Philippine economy seen to overcome bumpy ride, grow at more robust pace in 2016

MANILA, Philippines – The Philippines will power ahead of a “bumpy” financial market and emerge with robust economic performance, the chief economist of the Department of Finance said.

“Despite the ongoing volatility and increasing uncertainty, Philippine growth prospects remain robust,” Finance Undersecretary Gil Beltran said in an economic bulletin.

“It’s just that the country will have a bumpy ride ahead in the face of financial market volatility,” he added.

Turmoil in the global financial markets reignited in the first two weeks of 2016 on the back of concerns growth in China, Asia’s largest export market, is slowing.

Beltran said portfolio investments, which are usually channeled to these markets, would remain on the downtrend.

The narrow budget deficit – only around 16 percent of the cap last year as of November – is coupled with “sizable” foreign reserves that are good for 10.3 months of imports last year.

Lower inflation, which ended 2015 at its 20-year low of 1.4 percent, could also provide stability, Beltran said.

“The BSP (Bangko Sentral ng Pilipinas) has gradually cemented its reputation as an effective fighter of inflation,” Beltran said.

Public sector strength is enforced by a healthy private sector as well, with Beltran highlighting liquid banks and lower foreign debts as reasons.

“In a span of 10 years, private sector external debt-to-GDP ratio was halved from 24.1 percent in 2005 to 12.9 percent at the end of the third quarter in 2015,” Beltran said.

“The banking sector is also in a strong footing to absorb shocks in the system and mitigate risks,” Beltran added.

As for declining exports, the Finance official said the 5.8-percent dip as of November could deepen.

“One way is to find domestic and fast-growing emerging market opportunities. Another is to innovate on existing product lines, looking into possibilities of adding value into them,” Beltran said.

The Philippine Chamber of Commerce and Industry (PCCI), the country’s largest business organization, expects the economy to perform better this year on the back of an improving global economy and favorable local prospects.

In an interview, PCCI president George Barcelon said the business group is confident of sustained progress in the domestic economy this year with an expected gross domestic product (GDP) growth of at least six percent.

“I don’t foresee a (GDP) slowdown with our remittances from our overseas workers and also the still positive growth on the BPOs. Those would be enough to sustain us. Financially, our banks are stable. The sector is quite healthy. Issue on power, it seems that the more isolated cases have been addressed,” Barcelon said.

“The US economy is growing already. They are doing better than the European economy and hopefully that translates to more purchases not only from US but hopefully for Japan, and even from Europe. We have to admit the economy is really a consumer economy. One of the concerns is China. Lately, they have been having problems but despite that, we are well positioned to maintain the growth,” he added.

Barcelon said China’s slowdown presents an opportunity for the country to gain more foreign direct investments (FDI), echoing the foreign chambers’ belief the Philippines could be the next big investment hub in Asia as some investors make their exit from the world’s second largest economy.

“We are a beneficiary of foreign investments but at the same time, business is business. They will see if you have comparative advantage,” he said.

According to the PCCI president, among the factors that would help attract more FDIs to the country include the implementation of critical infrastructure development of Filipino workers’ skills to match industries demand, and improvement in telecommunications on both accessibility and services.

“We see this China slowdown as positive for the country with the interest we are receiving. But again, they may have the interest to come but the key issue is sustainability. Can they make their business work here, which I think definitely they can,” Barcelon said. – With Richmond Mercurio