Philippine economy seen weathering possible Turkey contagion
MANILA, Philippines — The Philippine economy is resilient enough to weather external headwinds, the Bangko Sentral ng Pilipinas said amid growing fears the financial crisis in Turkey could affect the global banking system and economy.
Nervous investors are keeping an eye on developments in Ankara. The crisis has been sparked by a series of issues including a faltering economy—the central bank has defied market calls for rate hikes—and tensions with the United States, which has hit Turkey with sanctions over its detention of an American pastor.
Investors are now fretting over potential economic contagion in emerging markets like the Philippines.
“The Philippine economy is quite resilient for several reasons. One is our fundamentals are very good. We’re growing strongly, the fiscal position is in order, the external position—despite the deficit—is moderate, and our indebtedness is low. So we’re in a strong fundamental position,” BSP Governor Nestor Espenilla said.
According to Espenilla, the central bank has a “pretty high” level of dollar reserves that provide liquidity buffer for the economy against external shocks. Data from the BSP show July’s gross international reserves level slumped to a fresh six-year low of $76.89 billion.
“For those three main reasons—fundamentals, sound policy, buffers—the Philippine economy is quite resilient to external factors. But that’s not to say that we won’t be affected by what’s going on outside,” the BSP chief said.
“We will be affected, but we’d like to think the impact would be relatively moderate and manageable,” he added.
Asian financial markets slipped on Monday, with markets in Philippines, Indonesia and Malaysia recording the biggest falls.
In a commentary, London-based Capital Economics said for most countries, the bloodbath in financial markets seem like an “overreaction” given their limited trade and financial ties to Turkey.
Capital Economics likewise said no country in Asia has the same mixture of economic and political vulnerabilities as Turkey amid fears of financial contagion.
“The 1997-98 Asian financial crisis and the more recent 2013 Taper Tantrum showed how a crisis in one economy can quickly spread to other countries that share similar vulnerabilities,” it said.
“Although there are concerns about rising populism in parts of Asia, notably the Philippines and Malaysia, the risks are nowhere near as acute as in Turkey, where President Erdogan has appointed his son-in-law as finance and treasury minister and has prevented the central bank from tightening policy,” it added. — with reports from BusinessWorld and AFP
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