ALTHOUGH it claimed that the Philippines is still on a positive growth path, the central bank has warned that a significant slowdown in the Chinese economy is a risk factor on Philippine growth.
Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr. said one of the key risk factors that poses a threat to Philippines’ position of relative strength is the possibility of getting stuck in what the International Monetary Fund calls the “New Mediocre.”
Tetangco discussed this scenario in a speech before the American Chamber of Commerce of the Philippines on Wednesday.
“As China has become central in Asian trade, any significant slowdown in the Chinese economy would cast a cloud on its trading partners’ growth,” he said.
Despite a series of easing measures announced by People’s Bank of China, financial conditions in the world’s second largest economy appear to remain fairly tight due to the effects of reforms on credit growth, Tetangco said.
Last year, China’s gross domestic product grew by 7.4 percent—the weakest annual expansion in 24 years.
“China’s economic slowdown could have a knockon impact on Asia (including the Philippines) through trade, investment and financial linkages with the region,” the BSP governor pointed out.
In terms of trade and investments, China is a major partner of the Philippines.
Latest government data showed China is the Philippines’ biggest source of imports, accounting for 12.0 percent of the $614.70 million in import payments last March.
China is also the third largest buyer of Philippine exports equivalent to 10.9 percent of the total shipments valued at $583.52 million.
In terms of foreign portfolio investments, China, through Hong Kong, is one of the top five investors in the Philippines in April.