PH growth may slow in 2015
MANILA, Philippines - Philippine growth may inch up next year but could slow in 2015, if the country raises interest rates to protect the peso as the Fed ends its stimulus program.
ICAEW, a global association of accountants, said more drag will come from the country's high unemployment and poverty levels.
"The economy of the Philippines has huge scope for increases in productivity. According to the Economic Insight report, even though the country may experience an initial lag as workers are retrained, new capital is invested and new supply chains are developed, strong growth in consumption and government spending will drive GDP up by 5.3% in 2013 and 5.4% in 2014," Mark Billington, Regional Director, ICAEW South East Asia, said in a statement.
"However, beyond this, high unemployment and poverty levels as well as a need to lift interest rates in response to tighter monetary conditions in the US may drag growth rates back down to 4.6% in 2015," he added.
The Philippine economy is one of the fastest growing in Asia. The Philippines grew an annual 7.5 percent in the second quarter, above the 7.3 percent market estimate, and compared with a revised 7.7 percent in the first three months of the year.
However, emerging economies such as the Philippines are seen to be vulnerable to the tightening of US monetary policy.
"Both companies and individuals in Philippines and the region have benefited from low interest rates, which have fuelled consumption and borrowing against future income. We are likely to see this gradually change as the US economy recovers and the Fed looks for an exit strategy from its very loose monetary policy stance," ICAEW Economic Advisor and Cebr's Head of Macroeconomics, Charles Davis, said.
"Consumers, businesses and governments will all now have to adjust to a period where loan availability drops and where the cost of borrowing money increases. However we believe that this will pick up again in 2015 as investor capital returns to seek advantage of opportunities for growth."