Asia’s next economic miracle
The Philippines is expected to grow at a robust pace of 6.4 per cent in 2015 amidst world economies that are running out of puff
SUNEETI AHUJA-KOHLI
Philippines, the ‘sick man of Asia’ as it was once called, has transitioned into a strong economy in the last decade, leaving behind several developed ones that are running out of puff. Despite a lingering economic slowdown globally and natural disasters that ripped up the beautiful island nation, Philippines managed to grow at an average of 5.9 per cent during the last three years.
As per estimates of the Asian Development Bank (ADB), the country is expected to continue performing creditably at around 6.4 per cent in the current financial year and maintain the momentum through the ensuing year at 6.3 per cent.
Interestingly, the robust pace of growth is a result of renewed government expenditure, buoyant private consumption, higher fixed investments and recovery in exports. So much that the country is now gearing to be among the fastest growing economies, next to India and China.
“The bold forecast is based on strong fundamentals — a stable macroeconomic framework (a regime of low inflation and large fiscal space), continued rise in remittances from overseas Filipino workers ($27 billion in 2014, up 6.3 per cent); a resurgent manufacturing sector and a well-performing service sector, a consistent build up of foreign exchange reserves (currently at $79.8 billion) and credit rating upgrades from international credit rating agencies,” points out Gilberto M. Llanto, President of the Philippines Institute of Development Studies.
Since 2007, the Philippines has managed to cut its external debt to GDP ratio (a comparison of what the country owes to what it produces) from around 40 per cent to around 20 per cent in 2014. The inflation numbers too have been reigned in, largely due to a drop in international oil prices that have taken pressure off consumer prices.
The International Monetary Fund (IMF) has hailed the country as an exception in Asia. “We see falling potential growth in the world and in Asia, in general, but Philippines is an outlier,” said IMF resident representative Shanaka Jayanath Peiris during a briefing in Manila recently. Jim Yong Kim, President of the World Bank echoes similar sentiments. He refers to the Philippines as “the next economic miracle in Asia.”
Despite its strong macroeconomic space and other fundamentals, a key event to look out for is the elections in June next year that will replace the incumbent President Benigno Aquino as he completes six years in office. So far, the market has responded favourably to the steadfast commitment of the president’s drive for transparency and good governance. As per the country’s constitution, President Aquino cannot seek a re-election and therefore change of leadership might make a lot of difference to how the policies will be framed and what reform agendas will be prioritised.
All in all, the headwinds are in favour of Philippines as it gears up to take its rightful position in the global economic landscape and inspire its people to return to a stronger country.