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THE
country’s economic growth is projected to surge to 7
percent this year and slow down to 6.4 percent in 2008
as the Asian Development Bank (ADB) identified the risks
to the growth in emerging East Asian economies next
year.
In the
December issue of the Asia Economic Monitor (AEM), the
ADB revised its growth projection for the Philippines
compared to its July AEM, where it projected the economy
to grow at only 5.8 percent by 2007 and 5.7 percent in
2008.
“The
four largest Asean economies—currently in the upswing
phase of their business cycles—are forecast to maintain
strong growth in 2008, with Indonesia and Thailand
accelerating, Malaysia maintaining this year’s pace, and
the Philippines slowing somewhat from a strong 2007,”
the report stated.
“In the
Philippines, GDP growth will remain high at about 6.4
percent in 2008—although off the postcrisis peak reached
this year—on strong gains in net exports, private
consumption and government spending,” the AEM added.
The ADB
said some of the risks that would pose a threat to the
Philippine economy and other emerging East Asia
economies are the possibility of a United States
recession, tightening of global credit, an abrupt
adjustment in exchange rates, and a continued rise in
oil and commodity prices.
The AEM
stated that if there is a sharp slowdown in the US
economy, this will significantly affect global trade
since many East Asian exporters consider the US as an
important export market.
The
Philippines, for one, considers the US its largest
export market. In the latest export data from the
National Statistics Office (NSO), exports to the US
accounted for 17.7 percent of the Philippines’ total
export earnings.
“If the
US economy enters a recession and the global economy
substantially slows in tandem, the impact on emerging
East Asian economies will be potent,” the AEM stated.
However,
if the
US
does not enter into a recession or experience a sharp
economic slowdown, threats posed by global financial
markets that may be entering a period of increased
volatility and its effects may cause East Asian
economies to experience significant economic slowdowns.
The AEM
stated that strains in money markets and some credit
markets will tighten general credit conditions by
increasing the cost and reducing the amount of funding.
The
report noted that major industrial countries such as the
US and European Union member-states have tightened their
lending standards. The AEM said there are even signs of
an overall reduction of credit supply to businesses and
households due to this.
Further,
the ADB said sudden changes in capital flows and abrupt
adjustments in exchange rates caused by large
global-payments imbalances and a potential reversal in
investors’ risk appetite are among the growing concerns
of East Asian economies.
ADB said
in a statement that the region’s macroeconomic managers
will gain by adopting greater flexibility of exchange
rates and exploring ways to maintain stability among
intraregional exchange rates.
It adds
that improving investment climate to boost domestic
demand, managing capital inflows and strengthening
domestic financial systems will also help the region to
underpin growth.
“Taken
together, a disorderly adjustment in global-payments
imbalances coupled with a sharp contraction in US
aggregate demand and a free fall of the US dollar,
although very unlikely, cannot be ruled out. This would
have a potentially serious impact on the region,” the
AEM added.
Meanwhile, high energy and food prices continue to pose
a threat to growth for many emerging East Asian
economies, particularly the People’s Republic of China (PRC)
and Hong Kong, China, where inflation is being fueled by
rising food prices, rapidly growing domestic demand,
tightening labor markets and strong foreign- exchange
inflows.
For the
rest of the region, although still manageable,
inflationary pressures are resurfacing due to narrowing
output gaps and rising input prices. The sustained rise
in global oil prices is a major concern and the scarcity
in supply and any disruption or heightened geopolitical
concern could lead to even higher prices.
“If
inflation—especially core inflation—heads higher,
monetary authorities in the region will have less
flexibility to deal with potentially slower economic
activity arising from weaker external demand,” the AEM
stated.
Due to
these risks, economic growth in emerging
East Asia will ease to 8 percent in 2008 from 8.5 percent in
2007. Economic growth in the PRC is expected to slow
down to 10.5 percent in 2008 from 11.4 percent in 2007
if government measures to cool the economy begin to take
hold. Growth in the Association of Southeast Asian
Nations is expected to slightly moderate to 6.1 percent
in 2008 from 6.3 percent in 2007. |
