Written by Luisa Maria Jacinta C. Jocson, a reporter.
It is predicted that the economy of the Philippines will experience to
Experience less impact from the economy.
According to Finance Secretary Benjamin E. Diokno, there has been a decrease in economic growth in China.
According to a statement made at the ASEAN Roundtable during the World Bank-IMF Annual Meetings on Oct. 11 in Marrakech, Morocco, the Philippines is anticipated to experience less impact from China’s decelerating economic growth. This is due to the fact that any potential decrease in exports may be offset by the strong demand within our domestic market.
Nevertheless, Mr. Diokno pointed out that the slowing economy of China could potentially have a negative impact on global trade and cause a decrease in the exports of goods and services from the Philippines.
In August, the total amount of goods exported increased by 4.2% compared to the previous year, reaching $6.7 billion. The leading recipient of Philippine exports in that month was the United States, which received goods worth $1.1 billion, followed by Japan with $918 million. Exports to Hong Kong and China were valued at $871 million and $838 million, respectively.
Sudden changes in investor confidence and risk prices may lead to a sudden increase in strictness of monetary policies.fi
“Changes in economic circumstances, money leaving the country, and decrease in the value of the peso. Escalation of political conflicts and division may interfere with the flow of goods and services and investment,” he stated.
According to Mr. Diokno, the ASEAN+3 region will encounter risks, both direct and indirect, due to China’s property crisis.
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The financial systems in the ASEAN+3 region may face risks from China’s property industry through three primary channels: direct lending to the sector, indirect exposure through other avenues, and potential impacts on their overall economy.fi
He stated that financial systems connected to that industry, as well as those lending to their own country’s economy, may be adversely affected by changes in China.
The International Monetary Fund forecasts that China’s growth will reach 5% in 2023, but will decrease to 4.2% in 2024. This is lower than the initial estimate due to the ongoing property crisis and decrease in external demand.
Despite being predicted as the fastest-growing economy in the ASEAN region for this year, the Philippines’ future remains uncertain due to external challenges.
According to Fred Neumann, the chief Asia economist at HSBC and co-head of Global Research Asia, the economic growth in the Philippines has shown impressive resilience in recent years. Despite slowing down slightly, the economy has remained strong after a significant recovery in 2022. Neumann stated this in an email.
“However, it is important to maintain a balanced view of the Philippine economy’s outperformance compared to its potential, as its growth is currently not meeting expectations. This is due to cyclical challenges such as rising interest rates, both domestically and internationally,” he stated.
Several organizations, including the International Monetary Fund, the World Bank, the Asian Development Bank, and AMRO, have lowered their predictions for the Philippines’ economic growth in 2023. While their forecasts fall short of the government’s target of 6-7% GDP growth, they are still expected to surpass other economies in Southeast Asia and the Asia-Pacific region.fic regions.
According to Mr. Neumann, the Philippines is surpassing other countries in the region because it is not as reliant on the global manufacturing cycle. This sets it apart from other economies that heavily rely on exporting manufactured goods.
The primary driver of the Philippine economy is consumption, with household spending accounting for 75% of economic growth.
According to HSBC, the Philippines’ GDP is projected to have an average growth rate of 4.8% in 2021 and 5.2% in 2024.
Mr. Neumann stated that there is a lot of uncertainty surrounding the forecasts, as there is currently limited information available on the third-quarter performance. He predicts a 4.7% year-on-year growth for the third quarter.
Miguel Chanco, Pantheon’s Chief Emerging Asia Economist, stated that they anticipate strong growth in the Philippines, but it may not be among the most robust in the region.
In an email, he stated that the Philippines is predicted to have a 4.5% growth in 2023 and 4% in 2024. This places them in the middle of the group rather than being one of the leading performers in the ASEAN region, as they were before the COVID-19 pandemic, along with Vietnam.
While the economy’s long-term potential for growth is strong, it is currently experiencing a temporary slowdown that will impact its standing within the region.
Nicholas Antonio T. Mapa, Senior Economist at ING Bank N.V. in Manila, stated that the Philippines is not expected to have the highest growth rate in the region.
The combination of challenges, both within the country and globally, may lead to a decrease in growth to 4.8% for the year,” he expressed in an email.
According to Mr. Chanco of Pantheon, the government’s goal of 6-7% was never attainable.
“As of now, our prediction for the third quarter’s GDP growth is below 2% compared to last year, indicating a potential recession in terms of quarter-to-quarter. The main contributor to the economy, private consumption, is experiencing instability due to having less support this year compared to the previous year,” stated the speaker.
Mr. Mapa from ING Bank stated that the growth for this year and 2024 may not even meet the lower end of the target.
“The convergence of limited spending caused by the diminishing effect of revenge spending and higher interest rates is expected to result in a deceleration of growth. Despite not yet experiencing the full impact of the Bangko Sentral ng Pilipinas (BSP) policy increases, we have already observed a decrease in growth momentum,” he stated.
The BSP has maintained a record-high benchmark interest rate of 6.25% since March in an effort to control inflation.flation.
According to Mr. Neumann from HSBC, high inflation and interest rates will impact household spending in the current year and in 2024. However, the Philippines is expected to continue performing better than other countries in the region.
In order to promote development, Mr. Neumann suggested that the country should prioritize increasing foreign investments in order to “enhance the manufacturing industry’s ties to regional supply chains.”
He stated that if the Philippines can increase their share of regional supply chain manufacturing, it would lead to a sustainable acceleration in growth through a rise in goods exports.
On November 9, the Philippine Statistics Authority will be publishing the GDP data for the third quarter.