Due to its sustained robust domestic demand, the Philippines is expectrd to outperform most of its peers in the region, with a 6 percent gross domestic product (GDP) growth in 2016 and 2017, said global debt watcher Moody’s Investors Service.
Moody noted that against a backdrop of subdued global demand, the growth prospects of Asean’s major export-orientated economies: Singapore, Malaysia and Thailand will remain weaker than those of more domestic demand-driven economies: Indonesia and the Philippines in 2016 and 2017.
In a report, Moody’s said among the members of the Asean, only Vietnam was expected to grow faster than the Philippines this year. It said Vietnam would likely grow 6.2 percent in 2016 and 6 percent in 2017.
Vietnam will remain the region’s growth performer on the back of robust manufacturing activity and strong foreign direct investment flows.
Vietnam is benefitting from strong manufacturing activity and rising FDI inflows, as foreign investors look to tap into a large and competitive labor force, as well as greater market access for Vietnamese exports resulting from preferential trade arrangements such as the Trans-Pacific Partnership Agreement, it said.
“While we expect growth recoveries in Singapore, Thailand and Malaysia to be shallow, Indonesia, the Philippines and Vietnam will post growth on par with, or exceeding, long-term averages by 2017,” it said.
Indonesia is seen growing 4.8 percent this year and 5.6 percent next year; Malaysia, 4.3 percent and 4.5 percent; and Thailand, 2.5 percent and 3 percent.
The Philippine economy grew 5.8 percent in 2015, slower than 6.1 percent in 2014, but remained one of the best growth in the Asean region.
However, the 2015 expansion was below the government’s official target of 7 to 8 percent for the year.
The government expects the economy to grow between 6.8 percent and 7.8 percent in 2016, anchored on robust domestic demand and stronger fiscal spending.
Moody’s said gross fixed capital formation growth was accelerating rapidly in the Philippines, and picking up pace in Indonesia. Public investment contributed to the pick-up as governments in both countries sought to gain further traction in developing much-needed infrastructure.
“Lower oil prices have provided greater lift to economic growth in the Philippines, with household consumption growing in excess of 6 percent for only the second time over the past 25 years,” Moody’s said.
Moody’s said export growth was slumping across the region, but the overall economic impact would vary, based on the relative importance of trade to GDP.
Data showed that total trade (the sum of exports and imports) accounted for 346 percent, 131 percent and 130 percent of GDP in Singapore, Malaysia and Thailand, respectively, much higher than Indonesia (41 percent) and the Philippines (58 percent).
“As such, these three economies are susceptible to a prolonged period of subdued global demand via both the export channel and weaker investment demand,” Moody’s said.
“Nevertheless, growth in Asean as a whole in 2016 and 2017 is unlikely to benefit significantly from ongoing regional and global economic integration efforts,” Moody’s said.
It said the Asean Economic Community, which came into effect at end-2015, would not be a game-changer for catalyzing intra-regional trade. It said cross-border tariffs have already been virtually eliminated for some time, so a material increase in intra-regional trade was unlikely. (SWCA)