The Philippines has become Asia’s fastest growing economy.
What was especially good about the latest figures on the Philippines economy is that its growth seems to be broadly based. This is an economy that is not reliant on any one sector or business model. And thanks to its young population, there is lots of potential too.
Although oddly, the booming Philippines is one of those countries that has elected a President, Rodrigo Duterte, whom some say is beyond the pale. It just goes to show that political extremism, if indeed that is what we are seeing in the Philippines, does not necessarily correlate with the performance of the economy.
In the third quarter of this year, Philippines GDP grew by 7.1%, with net exports up, investment rising, wages increasing – helping to lift consumer spending – a major infrastructure investment programme set to kick off, and with remittances from Filipinos working abroad, times are good.
The Duterte government is planning a $160 billion spend on infrastructure, for an economy the size of the Philippines this is truly massive, but its debts, both private and public are modest, and the payback on infrastructure investment is likely to be significant.
But there is a worry – maybe two worries. Remittances from the US are worth around three per cent of the Philippines’ GDP, and the US under Trump may not be too supportive of Filipino migrant workers.
Then there is the issue of Rodrigo Duterte, who has made a series of controversial comments and unpredictable policy changes. He has, for example, called for the withdrawal of US troops from the country, and has called Barack Obama “a son of a whore.” Which is not normally the kind of language that diplomats use.
Returning to the economy, Krystal Tan, Asia Economist at Capital Economics said that the medium-term outlook “has become much less certain following the election of Donald Trump as the next US president. While it remains to be seen if Trump will follow through on some of his more protectionist policies, if he did the repercussions for the Philippines would be significant. Remittances to the Philippines from the US are the equivalent to 3% of the country’s GDP, while exports to the US are equivalent to a further 4%. The Philippines’ booming business outsourcing sector which has benefited hugely from US investment, would also be hit hard by any attempt to bring back jobs to the US.”