By Karl Lester M. Yap
Neither Donald Trump’s protectionist ambitions nor Rodrigo Duterte’s rants against the US are proving to be enough to derail the Philippine economy’s momentum as one of the fastest-growing in the world.
That’s according to economists surveyed by Bloomberg News, who see growth exceeding 6 percent until 2018. Gifted with a burgeoning middle class and backed by $50 billion of revenue from remittances and outsourcing, the Southeast Asian economy is getting an additional boost from President Duterte’s $160-billion infrastructure plan.
Political risks “haven’t transpired into concrete policies,” said Gundy Cahyadi, an economist at DBS Group Holdings Ltd. in Singapore.
“We should pay more attention to hard data, which point to very robust growth prospects for the Philippines, given strong domestic demand,” Cahyadi said.
While the Philippines hasn’t been immune to the financial market rout since Trump’s shock win in the US election, strong domestic growth drivers have made it more resilient to global shocks compared to export-dependent Asian nations from Singapore to South Korea. Consumer spending makes up about 70 percent of the economy.
A government report on Thursday will probably show gross domestic product expanded 6.7 percent in the third quarter from a year ago after climbing 7 percent in the previous three months, according to the median estimate of 15 economists surveyed by Bloomberg.
Polled after Trump’s victory, economists forecast the economy will grow 6.6 percent this year, 6.3 percent in 2017 and 6.5 percent in 2018.
Investors have dumped Asian emerging-market assets after Trump’s victory, concerned that a rise in protectionism will curb global growth and trade. Indonesia and the Philippines have been among the worst-hit in Southeast Asia, with the peso falling near levels last seen during the 2009 global financial crisis.
Even before the US elections, financial markets were under pressure as investors worried about Duterte’s inflammatory attacks against the US—including his call for a “separation” from America—and his violent anti-drugs crusade that’s killed more than 3,000 people.
The American Chamber of Commerce, and businesses in the outsourcing and electronics industries, are among those that have raised concern that Duterte’s comments may harm the investment outlook.
Duterte has pledged to ramp up spending on roads, airports, seaports and railways to lure investors and create jobs. The Philippines has one of the lowest government debt ratios in Southeast Asia, at 40 percent of GDP, giving it room to boost spending.
“With foreign investors favoring emerging markets less, the Philippines is one of the better positioned to withstand the selloff,” said Joseph Incalcaterra, a Hong Kong-based economist with HSBC Holdings Plc. “The government has increasing scope to pursue fiscal stimulus and infrastructure build-up while private consumption will power growth.”
The gross domestic product grew 7 percent in the second quarter, according to the Philippine Statistics Authority. This brought the first semester growth at an average of 6.9 percent.
HSBC economist Joseph Incalcatera and Deutsche Bank analyst Diana Del Rosario projected a 6.5 percent growth rate for the third quarter.
“Consumer and business sentiment remained buoyant in Q3, which would suggest that private consumption and fixed capital formation barely slowed after elections,” Del Rosario said in an email.
Incalcatera said the Philippine economy was expected to continue to outperform the region. “Overall, the Philippine economy continues to be driven by higher investment—a reflection of the government’s infrastructure spending—and strong private consumption, which is driven both by firm domestic employment and resilient remittances. We expect this growth momentum to sustain into 2017, despite policy uncertainty in developed markets,” he said. With Gabrielle H. Binaday