New trading era kicks off

Philippines seen to post resilient growth of up to 6%

Local demand, a modest fiscal deficit and the current account surplus will help the Philippines' growth.
Local demand, a modest fiscal deficit and the current account surplus will help the Philippines' growth.PHOTO: EUROPEAN PRESSPHOTO AGENCY

The establishment of the Asean Economic Community means growth prospects for the new common market of 625 million people have never looked better. Rupali Karekar looks at what 2016 may have in store for five of the biggest economies of the 10-member bloc.

Impressive growth in The Philippines in recent years has prompted analysts to label the country the region's economic strongman.

Analytics firm IHS Global Insight upgraded the credit rating for South-east Asia's fifth-largest economy to positive and forecast that it would become a US$1 trillion (S$1.4 trillion) economy by 2030.

Resilient growth of 5.5 to 6 per cent is expected, underpinned by private consumption, a modest fiscal deficit and current account surplus fuelled mainly by remittances from its overseas workers and revenues from its business process outsourcing (BPO) industry.

"Domestic demand will remain supportive of the economy in the coming year," said Asia country risk analyst Chan Jin Lai of BMI Research. "A sustained increase in private-sector investment activity is also highly compelling."

But exports will continue to struggle amid general economic weakness in key regional trading partners China and Japan. Risks will also arise if weaker global growth undermines the income or employment of Filipinos overseas or in BPO, noted Bank of America Merrill Lynch analysts Jojo Gonzales and Claudio Piron. The currency will face continued headwinds in the face of the strong United States dollar, BMI's Mr Chan said.

Politically, the Philippines is gearing for elections this year that could end up stalling the reform process started by the outgoing President Benigno Aquino. "That said, Mr Aquino has established a strong foundation," Mr Chan said.

A version of this article appeared in the print edition of The Straits Times on January 06, 2016, with the headline 'Philippines seen to post resilient growth of up to 6%'. Print Edition | Subscribe