Think tank Asean+3 Macroeconomic Research Office (AMRO) yesterday cited the initiatives of the Philippines to beef up its infrastructure as a key element to its growth strategy.
Hoe Ee Khor, AMRO chief economist, in Thursday’s briefing on its flagship Asean+3 Financial Stability Report, took note of the country’s “very ambitious infrastructure plan” to address the needs of the country and attract more investors that can drive growth.
“And with that, I think the Philippines will grow quite rapidly,” said Khor, without giving figures. In late September, AMRO has maintained its outlook for Philippines growth, at 6.1 percent this year and 6.3 percent next year.
Khor said the Philippines’ infrastructure investments will shield the economy from downside risks from overseas, given its predominantly service driven economy compared to the export-oriented economies of competitors in the region.
“The Philippines is a very different economy from the other Asean countries in the sense that is a very service- driven economy. But it has been very resilient in the last few years after the big shock in 2020. It’s been growing at about 5.5, 6.5 percent, and it’s continuing to grow very strongly. It is attracting a lot of investments recently in the electronics sector, solar and wind power. The BPO (business process outsourcing) industry is still doing very well. And tourism (but it) needs to develop the infrastructure,” he said.
AMRO is banking on government spending and the steady service exports for keeping an optimistic outlook on the Philippines’ growth prospects.
Only Vietnam is expected to outpace the growth projections for the Philippines, for this year and next.
In its Asean+3 Financial Stability Report, AMRO said the region experienced an easing in global financial conditions as the US Federal Reserve concluded its policy rate hiking cycle in the first half of the year.
“However, in the third quarter of 2024, uncertainties about the US growth outlook, compounded by the unwinding of yen carry trades, sparked notable market volatility. The Fed commenced its monetary easing in September, which has led to an easing of monetary conditions, but uncertainties around inflation and growth outlook linger,” the report said.
“Moreover, the geopolitical situation in the Middle East remains fragile and the result of the upcoming US presidential election remains a major source of uncertainties for financial markets,” it added.
Khor, however, said overall, “the risk to financial stability across Asean+3 in 2024 appears lower than in 2023.”
“The current climate of robust growth and disinflation presents regional policymakers an opportunity to reduce debt, rebuild policy space, and strengthen fiscal capacity to better manage potential shocks. Replenishing foreign exchange reserves during times of capital inflows can further enhance market confidence and provide a buffer against extreme market volatility,” he said.
AMRO said that Asean+3 economies should remain vigilant against the risks of a resurgence of inflation, escalating geopolitical tensions, and a global growth slowdown in the near term.
