The Philippine economy likely grew faster than every other economy in Southeast Asia this yr, helped by stronger diplomacy with China and Japan and increased spending on infrastructure and the decision center industry.
According to government estimates, the whole value of products and services within the Philippines increased by 6.7 percent in 2016. Third quarter numbers of seven.1% exceeded comparable figures for Asia as an entire. The International Monetary Fund estimates that the Philippine economy is value $311 billion.
Philippine presidential spokesman Ernesto Abella cited achievements in foreign partnerships as the explanation for the economic growth. Since taking office in June, President Rodrigo Duterte has forged latest ties with China and strengthened ties with already interested investor Japan.
China’s influence is anticipated to grow
“In terms of impact on China, (the Philippines) is still one of the least dependent economies on China in the entire region,” said Rahul Bajoria, regional economist at Barclays in Singapore.
“However, over time, given current dynamics, China’s influence is expected to grow over the next three to five years,” he said. “The real gains may come in the form of FDI (foreign direct investment), potentially in both the manufacturing and mining sectors.”
In October, Duterte visited heads of state in China and Japan as a part of his policy to cut back dependence on the United States, the Philippines’ former colonizer.
China has pledged $24 billion in aid, and economists expect Japan to speculate in factories and finance development projects. A yr ago, Japan was the predominant source of direct investment within the Philippines, accounting for about 29 percent of the whole.
In 2017, Duterte will lead ASEAN, a bloc of 10 Southeast Asian countries. His spokesman told local media the role would help develop more overseas partnerships.
Based on Aquino
Duterte’s economic growth formula also partly comes from the ideas of former President Benigno Aquino, said Philippine Socio-economic Planning Secretary Ernesto Pernia.
Aquino increased infrastructure this yr to five percent of gross domestic product for expressways, mass transit in Metro Manila and railways in outer provinces. He also sought investors through what his administration called “China+1.” This program provided foreign firms in China with an incentive to expand within the Philippines.
Duterte intends to pay attention infrastructure development in rural areas of the Philippines, where lots of the country’s 25 million impoverished people live, Pernia said at a news conference.
“We are continuing the macroeconomic policies of the previous administration, but we’re increasing infrastructure spending, promoting regional and rural development, and investing heavily in human capital development, which incorporates health, education and nutrition,” Pernia told a news conference in a video replay.
To sustain infrastructure development, the Duterte government began spending $6.46 billion on schools, hospitals, flood control and airports in September.
The Philippine economy typically relies on consumption, remittances from Filipino staff stationed abroad, and call centers for multinational corporations based abroad.
English language skills and low wages attract call centers to the Philippines, and the Business Process Association of the Philippines estimates that decision centers had revenues of $25 billion in 2016. Remittances totaled $14.6 billion in the primary half of the yr.
The Manila-based Asian Development Bank forecasts growth for the Philippines of 6.4% this yr and 6.2% in 2017. The country has outpaced the remaining of Southeast Asia over the past five years, Bajoria says.
Other Southeastern Economies
Elsewhere in Asia, the Asian Development Bank projects that the Philippines’ economic expansion will lag that of China and India. India’s GDP is anticipated to grow by 7.4 percent this yr and seven.8 percent next yr.
Chinese aid to other parts of Southeast Asia could also be a sign of what the Philippines will receive. China is a serious investor in Malaysia and makes major contributions to the economies of Cambodia, Indonesia and Laos.
The Sino-Philippine maritime dispute that erupted in 2012 and culminated in a pro-Manila arbitration ruling from a worldwide arbitration court in July kept relations frosty until Duterte took office.
However, economists warn against high expectations for foreign investments. Foreign ownership rules discourage investors in sectors comparable to mining. The money from China could take the shape of loans or be used for specific projects which are in China’s interest. According to the World Bank, foreign direct investment amounted to 2 percent of GDP in 2015.
“The headline numbers are quite big, but at the same time some of them don’t look like a real type of investment — some of them look like loans,” said Christian de Guzman, vp and senior credit officer at Moody’s in Singapore.
“Just because these announcements have been made, a lot of things can happen as they are implemented,” he said. “It will not be as significant as in the case of Cambodia, where these investments as a share of GDP are actually quite large.”
