President Rodrigo Duterte may receive poor marks for his human rights record, but he’s doing really well when it comes to the economy, which beats China’s.
On economic growth rates that is.
The Philippines economy grew at an annual 6.9% in the September quarter of 2017, the strongest growth since the third quarter 2016. That’s slightly above China’s third quarter annual growth, which grew 6.8% in the third quarter of 2017, that country’s weakest pace of expansion since the fourth quarter of 2016.
For 2017, the Philippines economy is expected to advance between 6.5 to 7.5%, and occupy the position of the world’s 10th fastest growing economy, according to the World Bank.
GDP Annual Growth Rate in Philippines averaged 3.72 percent from 1982 until 2017, reaching an all-time high of 12.40% in the fourth quarter of 1988 and a record low of -11.10 percent in the first quarter of 1985, according to Tradingeconomics.com.
While growing faster, the Philippines economy has also been getting better. The trade deficit narrowed to USD 1.91 billion in September of 2017 from USD 2.02 billion in the same month a year earlier. Non-performing loans dropped down to 1.8%, as business access to bank lending improved. And the debt-to-GDP ratio edged lower, while that ratio, for other Asian countries including China, soared.
The Philippines’ economy has been helped by a stable macroeconomic environment, tax reforms, market liberalization, brisk infrastructure spending, and a revival in the global economy.
Equity markets have yet to take notice. The iShares MSCI Philippines Index rose 0.44% well below that of China and Vietnam.
| Fund | 3-Month Performance |
| iShares MSCI Philippines (EPHE) | 0.44% |
| iShares MSCI China (FXI) | 3.77 |
| Market V ETF (VNM) | 11.94 |
Source: Finance.yahoo.com 12/8/2017
Apparently, investors aren’t convinced about the sustainability of economic growth in the Philippines. Especially foreign investors, who have stayed away from Philippines equities.
There are a couple of reasons for that. One of them is Duterte’s on-going drug war, which threatens to lead the country into a civil war.
Then there are Duterte’s South China Sea flip-flops, which have added to geopolitical uncertainties surrounding the Philippines’ markets.
And there’s corruption, the usual killer of emerging market growth, which is getting worse, according to Transparency International.
Corruption has undermined the Philippines’ economic growth before, and it will kill it again, if Duterte fails to deliver on his pledge to ease this problem.
