The Philippine is among three countries in emerging Asia that enjoy lower leverage and have the potential for faster economic growth in the coming years, banking giant HSBC said.
“Looking for growth in the next few years? Or, more specifically, looking for the potential of a little positive growth delta at some point? There’s a simple way to look at this. These days, emerging Asia falls into two camps,” Frederic Neumann, co-head of Asia Economics Research said in a report.
Neumann said the first group of countries are open, highly export-sensitive markets like Korea, Taiwan, Hong Kong, Singapore, Malaysia, and Thailand.
“These, coincidentally, are also the ones with the highest debt loads. Here, a significant pick-up in growth seems unlikely any time soon,” he said.
The second camp includes the more closed economies, where, it turns out, leverage is also much lower. They are the Philippines, India, and Indonesia, where the potential for a significant acceleration in growth is the greatest.
The HSBC economist said the first group of emerging Asia countries are highly exposed to external demand.
“What’s more, they all carry relatively high debt burdens as well, making it increasingly hard to add extra oomph to local spending. So, for the time being, don’t expect much of a positive growth delta here,” he said.
The second camp, however, looks a little more promising, where the leverage is still low and exports do not play as large a role in driving growth.
“Indonesia has probably the lowest total debt-to-GDP [gross domestic product]ratio among major economies–anywhere. And the Philippines isn’t far behind. While high debt is suffocating growth in much of the world economy nowadays, that can’t be said of these two,” Neumann pointed out.
India’s leverage is a little higher, on the other hand, but it is mostly owed by the government, he said.
HSBC data showed that public debt as a share to GDP in the Philippines, India, and Indonesia last year stood at 47.7 percent, 68.2 percent, and 31.2 percent, respectively.
This year, it sees the ratio of debt-to-GDP in the Philippines to remain steady at 47.7 percent, while India will improve to 68.1 percent, and Indonesia to 30.1 percent.
Nevetheless, Neumann said this is not to say that economies in the second camp are about to deliver stunning growth. Much, for example, will depend on steady progress on reforms.
“Potential, after all, doesn’t automatically equate to future performance. But they already deliver robust growth, at least in the global context, and, much more than elsewhere, the possibility for a positive growth delta still exists,” he said.
For the Philippines alone, HSBC sees economic growing 5.9 percent this year, saying that it should “remain a regional outperformer given the domestically driven nature of growth.”