How did the Philippines trump China to become the fastest growing economy in Asia?

Economic expansions compared. The graph above shows the first-quarter growth in the GNP in the last five years. Illustration from Manila Standard Today

The Philippine economy grew by 7.8% in the first three months of 2013, surpassing every single analyst estimate and putting it just above China as one of Asia's fastest growing economies. The torrid growth, the best in nearly three years, is especially impressive given that exports declined 6.2% as electronics shipments collapsed.

So how is it growing so fast?

1) Infrastructure

The Philippines, like Thailand, is pursuing a massive infrastructure spending program worth around $10 billion. It covers a wide range of investments, from power plants and bridges to roads and schools. Although not all the money has been spent, the program has already created upwards of 400,000 jobs and helped win an investment grading from rating agencies, opening up the country to more international money.

2) Domestic Demand

If foreigners aren't going to buy your goods, you better hope the locals are. Domestic demand in the Philippines has been very strong, driven by private investment and consumer growth in a way that China must envy. Manufacturing growth in the country is up by 9.7% due to demand for food, appliances, communication and transport, and construction were up a whopping 32.5% in the first three months of the year. Services expanded 7%.

Filipinos preferred their products and called their Philippine made products as "genuine and Original" with better quality than imported products from china which they called them as "Lokal" or imitation with poor quality. Consumer's patronizing locally made Philippine products also boost the manufacturing sector in the country.

"Initially, this was led by infrastructure spending from the government," the National Economic and Development chief Artemio Balisacan told the Philippine Star. "By the second half of 2012, private construction started to rebound."

3) Overseas Filipino Remittance Payments

Underpinning domestic demand is a raft of Overseas Filipino remittance payments that make their way to the Philippines each year from its vast Diaspora—over $5 Billion Dollars in the first quarter of 2013. The cash transfers have long helped the Philippines pay off foreign debt and boost domestic consumption.

Can it continue?

Good news lasts only so long, and analysts have pointed to several risks. Exports may continue to fall as China slows and Europe stagnates. But the global slowdown had little impact on manufacturing so the Philippine could rely on domestic strong demand. Overseas Filipino Remittance payments, although large, are at their lowest in nearly four years, and the Philippine stock market tumbled almost 4% on Thursday, in line with the Nikkei, despite the strong economic growth figures. Manila is sticking with a 6-7% growth target for the whole of 2013.

"There's a disconnect between the economy and the valuation of the market," a Manila-based trader told Bloomberg. "While overseas investors say they like our economic fundamentals, they find valuations to be stretched."

The Philippine stock market is one of Asia's best performing bourses, up 41% in the last year, but traders are clearly worried about whether there is an asset bubble in the making. The Philippines has strengths China doesn't, but building roads and pushing up the budget deficit is not enough when it comes to a long-term strategy.

With report from QUARTZ

Previous Post
Next Post

0 comments:

Hello traveler! Thank you for leaving comment!. We encourage responsible and peaceful comments that add dimension our discussion. No Profanity , No bashing or hate speech, please. You can express your opinion without slamming others or making derogatory remarks.

Investment Recommendation: Bitcoin Investments



Where to buy Bitcoins?

For Philippine customers: You could buy Bitcoin Online at Coins.ph
For outside the Philippines customers  may buy Bitcoins online at Coinbase.com