Forget the laments that we’re getting a paltry share of direct foreign investments (FDIs) flowing into Southeast Asia;
Or that we have a comparative lack of raw materials, especially when compared to Indonesia, Malaysia and Myanmar.
Or that our share of the tourist traffic in Asean is small, even though our tourism secretary swears on the Bible and the Koran that “it’s more fun in the Philippines.”
These staples of analysis, long the favorite of Philippine-bashers, actually do not matter anymore. In fact, these disadvantages are paradoxically doing us some good by helping to protect us from China’s conomic meltdown and the global stock market rout.
This seemingly unbelievable assessment of the Philippine economy is the theme of a report on the Philippines that has been quietly moving in the media and the Internet. I read it in, of all places, the website of the Chicago Tribune. It reproduces verbatim a report from Bloomberg News that was first issued last August 24.
The piece is bylined by Ditas Lopez of Bloomberg News. It’s the most positive report on national prospects that I’ve seen in a long while. Following my policy of reporting positive news about our country whenever and wherever I find them, I discuss here today the
Bloomberg report. And I urge readers to read it in this link:
To those who fear that this might send President BS Aquino into delirium, I say don’t worry: the straight path is not mentioned in the article. Alas, the hellish traffic will still be there when you’re through reading it.
A safe haven amid the market rout
Ms. Lopez opens her report with this pregnant statement: “It’s more what the Philippines doesn’t have than what it does have that’s making the country Southeast Asia’s safe haven amid an emerging-market rout.”
I can best summarize the report by presenting substantive bullet quotes from it, along with my comments, viz;
1. “Relatively low levels of foreign investment in its bonds and stocks are shielding the Philippines from an intensifying selloff.” (They can’t sell off what they did not put in.)
2. “A comparative lack of raw materials means it’s less vulnerable than Indonesia or Malaysia to sliding commodities prices.” (We can bide our time in recovering Sabah, and wait for the next administration.)
3. “Stability under President Benigno Aquino stands in contrast to Thailand, ruled by the military since May 2014, and Malaysia, where the prime minister is facing calls to resign amid a political scandal.”
(Although there’s a renewed call for Aquino’s impeachment, he will probably serve out his term. His last two minutes can be awfully short in the sweep of time.)
4. “Philippine local-currency sovereign bonds returned 2.9 percent over the last three months, the most in Southeast Asia. The peso has held up better than its peers, losing 4.5 percent, compared with drops of 8 percent in Thailand’s baht, 12 percent in Indonesia’s rupiah and 18 percent in Malaysia’s ringgit.
5. “The benchmark Manila stocks index has also declined the least in the region over the period.”
“It’s definitely the regional star,” said Edwin Gutierrez, who helps oversee $13 billion as the head of emerging-market sovereign debt at Aberdeen Asset Management in London. “In a world starved of growth, Philippine growth — albeit slowing — is holding up relatively well,” he said.
“Outflows from Philippine stocks have also been more modest than for regional peers. Some $332 million has been pulled from the country’s shares this quarter, compared with $587 million from Indonesia and $1.6 billion from Thailand. The Philippine benchmark share gauge is down 13 percent in three months, trailing drops of 13.8 percent in Thailand, 14.3 percent in Malaysia and 21 percent in Indonesia.”
6. “The economy expanded 5.6 percent in the second quarter from a year earlier. That is an improvement from 5.2 percent expansion in the first three months, although slower than 6.1 percent in 2014.
“Indonesian and Malaysian growth slowed to 4.67 percent and 4.9 percent, respectively, last quarter, while Thai gross domestic product increased 2.8 percent.”
7. “A burgeoning business-process outsourcing industry is aiding the Philippine economy. Revenue from BPO, which includes customer call centers as well as the farming out of accounting tasks, will rise to $21.2 billion this year and $25 billion in 2016 from $18 billion in 2014, according to the IT and Business Process Association of the Philippines.”
8. “Money sent home by Filipinos living abroad, which makes up about 10 percent of GDP, increased 5.6 percent to $12.1 billion in the first half from a year earlier.” (Analysts project total remittances of $26 billion this year.)
9. “A net oil importer, the Philippines has also benefited from falling crude prices. The country ran a $3.3 billion current-account surplus in the first quarter, compared with $1.5 billion in the same period of 2014, according to central bank data.”
10. “The Philippines’ consumption-based economy and steady dollar inflows mean it’s insulated from China’s yuan devaluation and US interest-rate increases, according to Jay Peiris, the International Monetary Fund’s representative in Manila.
“It’s very hard to think of a country that’s less vulnerable,” he said in an Aug. 20 interview.”
(This is huge. Our defenses against China’s meltdown are much stronger than our defenses against Chinese bullying in the South China Sea. But Uncle Sam will be around to help, just in case.)
Philippines will outperform the region
The Philippines then is in a solid and strong position as it prepares to host the APEC leaders meeting later this year. The timing is exceptional.
“Standard & Poor’s has upgraded the Philippines’ credit rating four times during Aquino’s tenure and all of the three big ratings companies assess it as investment grade.
“Strong growth fundamentals, a large English-speaking population, fiscal and monetary prudence, and political stability support the positive outlook on the economy,” says Andrew Wood, the Singapore-based head of Asia Country Risk Research at BMI Research, part of Fitch Group.
“The Philippines’ large and growing labor force, along with increased policy-making credibility, should continue to draw investors’ interest over the medium term,” he said. “We believe the Philippines can continue to outperform the region.”
Underspending debunked and billionaires list
This leads me to conclude that the Bloomberg report is more significant than NEDA’s report that the economy grew by 5.6 percent in the second quarter, and Forbes magazine’s report on Filipino billionaires.
The uptick in GDP growth proves that the government’s policy of underspending was totally misguided. Spending, especially on infrastructure, once unleashed, has an immediate and positive effect on the economy.
It’s good to see Ayala’s top man, Jaime Augusto Zobel de Ayala (JAZA) join the top ten. Many have long wondered why the Ayalas never appear on these lists.
We should stop pining for Filipinos to make the list. Chinese-Filipinos are bonafide Filipinos – perhaps more so than Sen.Grace Poe.