Philippines most fundamentally sound economy in Asia – HSBC exec

MANILA, Philippines – The Philippines is the most fundamentally sound economy in the Asian region, a top bank economist.

Frederic Neumann, managing director and co-head of Asian Economic Research of the Hongkong and Shanghai Banking Corp. (HSBC), said yesterday.

“And the more important thing, so far, is that the present growth comes with a very low debt-to-GDP ratio,” he said, adding the rest of Asia is entering a period of critical debt saturation.

India and Indonesia are the other Asian economies that measures closest to the Philippines in terms of low debt-to-GDP ratio, he added.

The positive outlook towards the Philippine economy prompted HSBC to revise upward the gross domestic growth (GDP) forecast to 5.9 percent this year from an earlier 5.7 percent and 5.8 percent in 2017.

“We increased our 2016 outlook slightly due to the anticipated positive influence of election spending,” he said.

But there are challenges internally that the Philippines must address to keep a strong growth momentum, he said.

“The next administrations must increase infrastructure spending at a much faster pace,” Neumann said.

Infrastructure spending should focus on building more world-class airports, more railways, reduce congestions in ports and roads, make electricity more dependable, and to ensure sufficient water supply.

The Philippines must attract more foreign direct investments (FDI), as it would add more capital, more know-how, and competitive pressure to the domestic business market.

FDIs rose from $1.07 billion in 2010 to $6 billion in 2014. Comparatively, Indonesia reported $13.8 billion in 2010 to $ 21 billion in 2013.

Newman explained the manufacturing sector should produce consumer products that can replace their imported counterparts. It could also employ a large number of Filipinos than any other sector in the economy.

The agriculture sector is also another sector that should increase its contribution to the economy. It produces consumer goods that could replace imported counterparts thus avoiding the need for debt.

“The Philippines would be a victim of its own success unless it can overcome the different roadblocks,” Neumann added.