Philippines among least affected by China slowdown — Moody’s

Lawrence Agcaoili - The Philippine Star

MANILA, Philippines — The Philippines is among the countries in Asia Pacific that is least exposed to a fall in Chinese demand arising from the trade war between the US and China, according to Moody’s Investors Service.

In a report, the debt watcher said the Philippines may post a softer decline in gross domestic product (GDP) growth amid the weakening global output, particularly the slowdown in China.

Moody’s said the Philippines is ranked sixth least exposed to a fall in Chinese demand after Bangladesh, India, Sri Lanka, Pakistan, and Indonesia, while Hong Kong, Mongolia, Singapore, Vietnam and Taiwan are among the most exposed to a sustained slowdown in China.

“These trade driven economies are key nodes in the manufacture of intermediate products, especially for electronics, which are particularly exposed to tensions between the US and China. Given the uncertain outlook for growth and trade policy, as well as generally tighter financing conditions, slower investment growth will amplify the trade slowdown,” Moody’s said.

It said the country’s exports to China accounted for 11.7 percent of GDP.

The debt watcher said Asian exports entered 2019 on a weak footing, slowing to 4.3 percent year-on-year in the fourth quarter of 2018, down from a recent high of nearly 14 percent in the third quarter of 2017.

Moody’s said the weakening in export shipments over the past year has been broad-based, reflecting the deteriorating outlook for global growth and, in particular, China.

“Lower import demand from the region’s largest economy reflects both domestic and external factors, including slower domestic demand as credit availability has tightened and the trade dispute with the US,” it said.

While more granular data for the private sector is not available, Moody’s said the milder deceleration in gross fixed capital formation in the Philippines and Indonesia likely follows on from local policy rate increases.

“Over the past year, they have also been subject to higher market interest rates against the backdrop of their widening current account deficits and exchange rate volatility,” it said.

The Philippines booked a record current account (CA) deficit of $7.9 billion or 2.4 percent of GDP due to widening trade deficit on account of strong import to support the growing economy.

“We project some of these pressures to ease somewhat on account of lower oil prices and slower expectations of tightening by the US Federal Reserve, among other factors, although a sharp tightening in financing conditions may occur in particular markets, especially where policy credibility is relatively weak,” Moody’s said.


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