..MANILA, Aug 30 (Reuters) - The Philippine economy likely
slowed in the second quarter as exports slumped, but strong
domestic demand and investment growth are still expected to
cushion much of Southeast Asia from the worst of the global
downturn in coming months.
Data on Thursday is expected to show the economy expanded by
1.1 percent in April-June from the first three months of the
year, down from first-quarter growth of 2.5 percent, which was a
two-year high, according to a Reuters poll of economists.
From a year earlier, the Philippines economy probably grew
5.7 percent, weaker than the first quarter's 6.4 percent surge
but still far stronger than most developed countries and some
much larger emerging economies such as Brazil and Russia.
Riding a wave of strong domestic consumption, higher public
spending and investment inflows, much of Southeast Asia was
strikingly buoyant in the second quarter, with Indonesia,
Malaysia and Thailand all posting stronger-than-expected
economic expansions. Tiny, trade-reliant Singapore has been the
only outlier, struggling to avoid slipping back into recession.
While export data may not be pretty in coming months,
economists say longer-term fundamentals remain strong enough in
the region to continue attracting foreign investors.
"There is a re-rating going on in Indonesia and the
Philippines, with Indonesia recently upgraded to
investment-grade (credit) status and the Philippines right
behind. Things have really clicked in those economies," said ING
economist Tim Condon in Singapore.
"Unless you get a September 2008-style global panic, there
is enough resilience in these countries' domestic demand to
offset export weakness," Condon said, noting he expected
external demand would stagnate for the rest of the year before
stabilising in 2013.
GLOBAL RISKS, REGIONAL RESILIENCE...FOR NOW
While not immune to a sharp or prolonged global downdraft
-- Indonesian exports in June fell 16 percent from a year
earlier -- many Asian economies have two considerable advantages
over their developed counterparts in the West in the current
downturn: growing ranks of more affluent consumers and
governments with healthy finances which are willing and able to
The Philippines, where money sent home by citizens working
abroad fuels domestic consumption, in June received the biggest
amount for any month, $1.81 billion. That took remittances in
the first half of 2012 to $10.1 billion, up more than 5 percent
from last year.
Government spending in the first seven month of 2012 --
excluding interest payments -- surged 15.2 percent from a year
earlier, also helping offset the impact of faltering exports and
weaker farm output.
In Indonesia and Malaysia, the story is much the same: there
are jumps in consumption as well as surging public and private
Condon at ING expects Indonesia's economy to grow by around
6 percent this year and the Philippines by 4.5 to 5 percent,
with solid outlooks for 2013, but added that Malaysia's
trajectory may be more uncertain if the government ratchets back
spending after coming elections, which are due by April.
Indonesia's growth has been so robust, in fact, that the
central bank recently publicly rejected concerns among some
market watchers that the economy is overheating.
The central bank forecasts full-year loan growth at 25-26
percent this year, and investors have been pouring into its
equity and debt markets.
Some economists say the central bank will need to tighten
policy by the end of the year to dampen surging demand for
imports that created a record trade deficit in June. But most
see pro-growth Bank Indonesia keeping record low interest rates
into 2013, to allow local consumption to keep the economy
The government expects spending by a burgeoning middle class
and foreign investment interest to keep growth at between 6.3
percent and 6.5 percent this year and to drive it higher to 6.8
percent next year.
Thailand is more of an enigma, with weak global demand
biting deeper just as industry looks to fully recover from
devastating floods in late 2011. Still, the local stock market
is the best performer in Asia, having surged more than
20 percent so far this year.
The government reported on Wednesday that exports fell 4.46
percent in July from a year before as Europe's debt crisis
Even so, unless there is a sharp deterioration in the euro
zone, Thai GDP is likely to see solid growth of 5.7 percent this
year, according to the central bank.
In part, that reflects a return to normality after a series
of unnatural events that buffeted the economy in 2011, starting
with the Japanese earthquake and tsunami in March and the
disastrous flooding at home that closed seven huge industrial
estates from October.
Exports account for more than 60 percent of Thailand's gross
domestic product each year, compared with around 20 percent for
Indonesia, where domestic consumption accounts for about 55
percent of GDP.