Sustained growth spurred by tourism, investments, remittances, and
business process outsourcing limits the risks faced by the Philippine
economy in the coming years compared to its Asian peers, according to
global financial services giant Nomura.
Its June
28 report “Asia's rising risk premium,” released on Tuesday, noted
Asian economies will be distinguished based on macroeconomic risks when
the US Federal Reserve starts scaling back its $85-billion bond buying
stimulus.
“The investor preference would be for
sustainable growth over fast growth, favoring countries that pursue
structural reforms and unwind the loose macro policies... The
Philippines stands out in this low-risk category,” the report read.
“[C]ountries either with weak economic fundamentals or that are too
slow in normalizing macro policies and implementing structural reforms
could struggle to attract investment,” it added.
Nomura groups China, Hong Kong and India “firmly” in the high-risk
danger zone category, while Indonesia is at the lower end of high-risk
zone.
Korea, Malaysia, Singapore, Thailand and
Japan are in the medium risk zone, while Taiwan shares the low risk zone
with the Philippines.
Nomura's barometer was
largely based on residential property prices, domestic private credit
and savings as well as their ratio to a country's output.
“The danger zone does not mean that a financial or balance of payments crisis is imminent,” Nomura clarified.
“But it does mean that, without a move toward less-accommodative macro
policies to rein in debt and property markets, and a step-up of
structural reforms to boost productivity-enhancing supply, some
countries could face a crisis in the next few years,” it added.
Rising investments
By contrast, the Philippines' rising investments, particularly in
infrastructure, as well as sustained dollar inflows from remittances and
BPOs “continue to be highly supportive of strong growth momentum which
looks to be set in motion for the next couple of years,” Nomura said.
Nomura noted that the Philippines is slowly moving towards an
investment driven economy. “From a savings/investment perspective, a
strong investment cycle is underway, led by private sector capex
(capital expenditure) spending,” the report read.
“This rise in investment ratios has been accompanied by higher domestic
savings, boosted by a growing middle class, as well as lower fiscal
deficits as a result of reforms to improve governance,” it added.
The financial giant expects remittances—already up 5.7 percent
year-on-year to $6.916 billion as of end-April—to remain the
Philippines' key economic driver on the back of “strong demand for
higher-skilled workers.”
Sought for comment,
University of Asia and Pacific School of Economics dean Peter U said the
Philippines is now “better positioned to face risks.”
“We're at a high point compared to our past. And probably better ,” U told GMA News Online.
The economist said the country will “stay within strong growth
trajectory” on the back of government hiking infrastructure spending and
private construction.
The country's “fairly
healthy” dollar reserves—$82.9 billion as of end-May—provide room for
monetary policy moves that can cushion any risks, U noted.
The Philippine economy grew 7.8 percent in the first quarter, the fastest in Asia. — VS, GMA News
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