Lee C. Chipongian
The Philippines is one of the countries "at some risk" of exposure against the projected slowdown of the US economy this year, less so than Hong Kong, Singapore and Taiwan, according to global investment and financial house Credit Suisse.
"We think China and Indonesia are ‘least at risk,’ (while) India, Korea, Malaysia, Thailand and the Philippines are ‘at some risk,’ and Hong Kong, Singapore and Taiwan are ‘most at risk,’ to a further slowdown in the G3 (US, Europe and Japan) economies," said Cem Karacadag and Colin Teo, both analysts from Credit Suisse, in a February report.
In its "G3 slowdown: Asia’s least and most exposed economies" report, Credit Suisse noted that the Philippines’ strong domestic demand and the expected growth in remittances from migrant workers are two of the factors that would cushion the local economy from a global market decline.
"The Philippines’ export and growth exposures are manageable, in our view," said Karacadag and Teo. "(The) economy’s sensitivity to G3 (US, Europe and Japan) may be lower in 2008. Overseas workers’ remittances smooth consumption, the growth of which has been the least volatile in Southeast Asia." The central bank said remittances would likely range between $ 16-17 billion this year, from $ 14.7 billion in 2007.
"We expect remittances to continue growing in 2008, albeit at a lower rate than in 2007, owing to the boom in the Middle East, which hosts the largest number of overseas Filipino workers. The momentum in domestic demand is also strong thanks to accelerating consumption and investment, and historically low credit risk premiums and local interest rates," the paper said.
For 2008, Credit Suisse forecast gross domestic product (GDP) to grow by a modest 5.6 percent, lower than official government projection of 6.3 to 7 percent.
In the meantime, based on its assessments, the paper said the Philippines’ G3 risk exposure is "moderate" due to a "strong" domestic demand momentum amidst the "high" policy flexibility as environment.
As for risk exposures to other factors, such as financial market volatility, Credit Suisse said the Philippines has a "low" financial market risk exposure, while its export exposure is "moderate"; its commodity price exposure in the meantime is "low" while the scope for a rate cut is "moderate." However, the scope for fiscal expansion is considered "limited" at this point.
Other countries "at some risk" to G3 economies’ slowdown, includes India, Korea, Malaysia and Thailand.
"Least at risk" countries are China because of its low growth risk and strong policy support, and Indonesia with its high commodity prices that offer some protection against external risks.
"Most at risk" economies are Hong Kong, Singapore and Taiwan, according to Credit Suisse.
Hong Kong is the "second most exposed to a slowdown in the G3 after Singapore" because of its high trade and financial market exposure. Singapore’s saving grace, despite its equally high trade exposure, is its "exceptionally" strong domestic demand.
Taiwan is considered the most exposed because of its "very high sensitivity to changes in external demand and to changes in G3 growth rates in recent years." "It also stands out as being the only emerging Asia economy with virtually no momentum in domestic demand; consumption, investment and credit growth have been anemic at low-single digit levels," the paper said.
