STRONG GROWTH in developing Southeast Asia is “credit positive,” Moody’s
Investors Service yesterday said, with countries such as the Philippines
expected to continue posting gains amid lackluster outlooks for other regional
economies.
"Economic resilience in
these countries is credit positive because it supports government revenues and
mitigates the need for stimulus spending to support growth," Moody’s
Assistant Vice-President Christian de Guzman said in a report.
"Developing Southeast Asia’s
accelerating economic growth bucks the trend of lackluster growth in other
parts of Asia, particularly in China and Asia’s newly industrialized economies
of Hong Kong, Singapore, South Korea and Taiwan," he added.
Thailand’s gross domestic product
(GDP) grew by an "unexpectedly strong" 4.2% in the second quarter, up
from 0.4% at the start of the year. Indonesia also accelerated to 6.4% in the
second quarter from 6.3% in January to March, while Malaysia saw an uptick to
5.4% from 4.9%.
"We expect the Philippines’
economy, which grew by 6.4% in the first quarter, the fastest rate in ASEAN
(Association of Southeast Asian Nations), to show similarly healthy
second-quarter growth," Mr. de Guzman said.
As exports have been brought down
by softening prices in international markets along with weak demand from the US
and Europe, developing Southeast Asia has been supported mainly by domestic
economies, Moody’s said.
Stable inflation and favorable
consumer sentiment have sustained private household spending while foreign
direct investments are also strong, it added, and more importantly government
revenues have remained buoyant, reflecting profitable businesses and healthy
labor markets.
"Although developing ASEAN’s
immunity to external headwinds may not last for long, central banks in these
countries have the flexibility to cut rates to stimulate activity and relieve
pressure on fiscal authorities to increase deficit spending, thereby raising
debt ratios," Moody’s said.
The Bangko Sentral ng Pilipinas
last month cut policy rates by 25 basis points, reducing overnight borrowing
and lending rates to record lows of 3.75% and 5.75%, respectively. The
government has also kept its fiscal deficit at manageable levels, at P73.731
billion as of July and well under the P279.1-billion full-year ceiling.
Official second-quarter growth
data will be released this Thursday and economic managers are optimistic,
claiming that the expansion could be as strong as in the first quarter.
Analysts, though, are not as
confident. A BusinessWorld poll had a median forecast of 5.86% and in a
separate report, Moody’s Analytics -- the research arm of Moody’s -- projected
growth of only 4.2%.
The government has set a 5-6%
target for 2012.
Moody’s urged the Philippines to
seek a higher growth path as it raised its outlook for the country to positive
from stable in May. The move set the stage for a possible upgrade of the
Philippines’ Ba2 credit rating -- two notches below investment grade -- in the
next 12 to 18 months.
An upgrade would align Moody’s
credit rating with those of Fitch Ratings and Standard & Poor’s: both at
BB+, one notch below investment grade.
DIANE CLAIRE J. JIAO
Business & Investment Opportunities
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