Economist: PH economy is stable

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Monday, July 28, 2014

AMID the rising tensions in Ukraine and the Middle East that have threatened global inflation and sparked hikes in oil prices, the Philippine economy will remain resilient and stable, the chief economist of regional life insurer AIA Group said.

Brian Murray, who is also AIA Group’s head of research, said he is confident that the Philippines will be able withstand the impact should conflicts in the Middle East and Ukraine escalates on the back of the country’s strong economic fundamentals.

“These conflicts will surely affect global market’s confidence, but I am not so concerned of its effects to the Philippine economy because the country has been proactive in managing its fiscal and monetary policies even during the global economic crisis, such that it did not impact its economic growth,” said Murray, during last Friday’s press conference at the Cebu City Marriott Hotel.


Better off

He noted that Asian countries like India, Indonesia, Malaysia and Thailand are more likely to face adverse effects of an oil price hike than the Philippines.

“The Philippines is well positioned to withstand these external shocks, proven by its track record of resiliency in the past six years,” said Murray. 

He pointed out that the country responded well even to domestic shocks when the super typhoon hit the country last year, which resulted in slow growth and uptick inflation in the early part of the year.

“Your gross domestic product (GDP) outlook and public financing haven’t fundamentally changed. On the contrary, it remained on the positive track,” he said.

Growth patterns

The Philippine economy expanded by 6.5 percent in the fourth quarter of 2013, bringing last year’s full GDP growth to 7.2 percent. The growth could have been higher had the country not been affected by various disasters such as the Bohol earthquake, the Zamboanga siege and typhoon Yolanda.

The country remains as one of the best performing economies in the Asian region in the fourth quarter of 2013, second only to China, which grew by 7.7 percent.

It, however, posted 5.7 percent GDP growth in the first quarter this year due to the lingering effects of typhoon Yolanda.

Amid these external and internal factors, Murray reported that the global market’s sentiment on Asia remains positive. He said growth is “much better in emerging Asia than in developed countries.” 

For instance, the Philippines has brighter prospects because of its economic growth being “stable, unleveraged and balanced.”


Murray said the country’s growth is not based on expanding credit but on high savings and credit surplus. “Your growth is not fueled by debt,” he said. 

Moreover, the Philippine economic growth is balanced and no longer relies on consumption like the American economy. It has good investments like the Chinese economy and exports like the German economy. “You basically have high consumption, good investment spending and high overseas remittances.”

He added the country’s public financing is doing well, with fiscal deficit at 1.5 percent of the GDP while public debt to GDP dropped to 49.2 percent in 2013, which earned for the country rating upgrades. But Murray argued the figures are “too good” and that the government should afford higher fiscal deficit and more fiscal spending for infrastructure development.

“Looking at investor surveys to the Philippines, they are increasingly positive. But looking at the negative sentiment, it could be the lack of progress infrastructure investment so the private-public partnerships (PPP) is what exactly the Philippines needs in terms of providing a long-term basis for economic growth,” he stressed.


While inflation rates of other countries like the US remain low, consumer price inflation in the country is picking up. But Murray said it is not a huge concern, since the uptick in inflation might be due to the lingering effects of the natural calamities that hit the country last year. 

Inflation is a sustained increase in the general price level of goods and services in an economy over a period of time.

He lauded the initiatives of Bangko Sentral ng Pilipinas in remaining proactive and professional in managing fiscal policy and maintaining stable growth amid the external shocks in the past years like the US recession in 2008, followed by the Eurozone crisis in 2010 to 2011, the influx of quantitative easing purchases and taper tantrums last year.

“In all instances, your central bank has been proactive in managing monetary policies and inflation, making sure that these external factors will not disrupt the growth of the economy,” he said.

Other spending

For growth to trickle down to the masses, Murray suggested the government also develop its soft infrastructure, such as healthcare and education. He noted that the next wave of economic development is on soft infrastructure—intellectual capital services or programs.

“Education is the tool that will allow those in the lower income to move to middle income and middle to high. This is the type of spending that is also relevant for long-term growth,” said Murray.

Murray was one of the speakers during the Philam Asset Management Inc. (Pami) Investor Series held here. Pami is a wholly-owned subsidiary of Philam Life, one of the country’s premier insurance company and is an affiliate of AIA Group Limited. 

After Cebu, Pami will also hold investor forums in Davao and Manila.

Published in the Sun.Star Cebu newspaper on July 29, 2014.


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