Philippines to Lead Economic Growth in ASEAN
Jul. 31 – ASEAN will outperform other Asia-Pacific economies next year as China’s growth slows, according to a report issued by Standard & Poor’s (S&P) this week.
In their report titled “Credit Conditions: Increased China Downside Risk Dampens Asia’s Growth,” S&P lowered their forecast for year-end growth in Asia-Pacific from 5.5 percent to 5.3 percent. Growth in the first half of 2013 came in below expectation due to “sluggish external demand and internal growth drivers.” The report cited China’s continued slowdown as the “main risk factor for the region.”
Despite growth concerns and a lowering of expectations for 2013, S&P expects larger growth next year as the ASEAN bloc leads growth to 5.6 percent in 2014.
“The ASEAN sub-region will continue to be the bright spot in Asia-Pacific, owing to the larger contribution of domestic demand to growth in these economies,” stated the S&P report.
Topping growth in ASEAN will be the Philippines and Indonesia, according to analysts at S&P. The Philippines will be the fastest grower, with its economy expanding at a rate of 6.9 percent. The Filipino government has also targeted their growth in the range of 6.5 to 7 percent by year’s end.
“The more domestically-led ASEAN economies, headed by the Philippines and Indonesia, continue to outperform the more trade-dependent newly industrialized economies,” noted the report.
Interest rates in the Philippines were cut to their lowest number in the country’s history to spark domestic growth amidst the international economic slowdown. Following these cuts, the Philippines became one of the fastest growers in Asia, with GDP rising to 6.6 percent in 2012. In order to sustain this growth, the Filipino central bank will maintain the low interest rates, possibly until 2015.
“Given our assessment of the balance of risks to inflation, the domestic growth prospects and the volatilities from the external environment, there is no need to deviate from our current policy stance,” said Amando Tetangco Jr, the Governor of the Philippines’ central bank.
The central bank’s policies have increased domestic demand in the Philippines, a trend further bolstered by large remittances from Filipinos working overseas.
The export-focused economies of the ASEAN bloc, however, have faced stronger economic headwinds due to lower demand internationally. Thailand is expected to see growth of only 3.9 percent by year’s end and Singapore is projected by S&P to have a growth rate of only 3.2 percent.
Along with the high growth of the Philippines, Indonesia is expected to experience an increased growth rate, reaching 6.1 percent this year.
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