Modern infrastructure, economic confidence and above all, strong aggregate demand are key drivers for the growth of the economy, says economist.
Global economy stands at a crossroad, financial markets remain volatile and nervous. Valuations are at all-time highs in the equity market but not based on reality. Every economy is going through some arduous challenges. Investors are looking at government policies and confidence in many countries. Europe, USA and Japan are struggling in their economic outlook.
The region that is booming at the moment is Asia where economic resilience and strong aggregate demand are driving economic growth. Few regions are achieving a phenomenal growth rate. The Philippines is a rising star along with Malaysia and Vietnam.
The Philippines is important for global investors due to the following reasons:
1. Political stability –– Strong government
2. Economic confidence –– Appreciating assets
3. Belt and Road player — First tier country
4. Strong aggregate demand –– Solid consumption
5. Educated labour work –– Higher productivity
6. Strategic geography –– High importance
7. Strong energy demand –– Rising middle class
Ever since China announced the Belt and Road initiative, some countries are becoming very relevant and investors are looking at those countries very favourably. According to Bloomberg dated 17th Aug, 2017:
“Philippines’ economy grew faster than 6 percent for an eighth consecutive quarter, underscoring the nation’s resilience as domestic and global challenges mount. Gross domestic product increased 6.5 percent in the second quarter from a year earlier”.
The first quarter GDP growth was trading at 6.4% which would boost the economy in 2017 and onwards.
According to market intelligence report, the economic outlook for the Philippines is robust and domestic demand remains intact. The Government has taken other measures like tax reforms and constitutional changes to give confidence to local and global investors.
The demographics of 100 million people is the main source of confidence keeping the economy dynamic with strong consumption coming from young people. Rising reserves and improving per capita income are a further source of confidence to MNCs to invest in the Philippines which is an archipelago of 7,100 small islands. The GDP is expected to touch 7% in the coming 2 years, making a strong case for global investors to take long position in the country.
” The GDP is expected to touch 7% in the coming 2 years, making a strong case for global investors to take long position in the country. “
SMART MOVES LATELY
According to Strategic Culture Foundation, how President Duterte is positioning the Philippines in the emerging Multipolar world order is very strategic. In addition to purchases of arms from Russia, still unclear in terms of quantity but certainly imminent, Manila and Beijing have begun a slow but inexorable rapprochement.
In recent months, the discussions surrounding the Scarborough Shoal have progressed from rhetoric involving threats to cooperation and dialogue. The situation has shifted from a possible war to a major agreement summed up by the Defence Minister of the Philippines, Delfin Lorenzana, “The Chinese will not occupy new features in the South China Sea nor will they build structures in Scarborough Shoal.”
This statement, agreed on with Beijing, is the basis of a new concept of the multipolar world order that heavily relies on respect for international relations. Fair negotiations grounded on common interests shared by all parties involved are what unite different countries. It represents a striking difference to the old unipolar world order where military force and power are imposed by Washington on practically every other state. Manila has every interest in developing a new and fruitful dialogue with Beijing, hoping to solve all controversies related to contested areas. The impetus for such talks seems to be economic.
The areas disputed by China and the Philippines in the South China Sea, besides being important for geostrategic reasons, contain considerable reserves of natural resources. What appears to be on the cards is an agreement between Manila and the Philippines to jointly explore territories that are undisputed by the Philippine oil and gas firm PXP Energy Corp and the China National Offshore Oil Corp. Revenues are to be apportioned in the following ratio: 60% to Manila and 40% to Beijing in any area under the control of the Philippines authorities.
OBSESSION WITH INFRASTRUCTURE
The obsession with infrastructure and keeping the growth momentum intact will put the Philippines in the eyes of global investors who have made these obsession variables as part of their investment criteria. So it boils down to modern infrastructure, economic confidence and above all, strong aggregate demand as the key drivers for the growth of the economy moving forward. The Philippines fits in with the global macro equation and stays relevant for sophisticated investors. So I continue to be optimistic about the growth of the Philippines economy in the long run.
SHAN SAEED is Chief Economies at IQI Global, a leading real estate brokerage house operating and advising clients in Kuala Lumpur, Singapore, MAnama, Toronto, Makati and Melbourne.