Philippines 'no longer the sick man of Asia'

The Philippines is no longer the "sick man of Asia", as it is now a "viable destination for investments and tourists", President Benigno Aquino has said.

"No longer are we the 'sick man of Asia'; we are now Asia's bright spot," he said yesterday as he received members of the ASEAN Business Club who are attending this week's World Economic Forum on East Asia.

The Philippines has been called Asia's "sick man" - a moniker that once belonged to China - as it has lagged behind many of its neighbours, with inconsistent growth amid massive poverty.

Since Mr Aquino was elected in June 2010, however, it has enjoyed growth rates second only to China's, with gross domestic product spiking 7.2 per cent last year.

The stock market hit record highs and foreign direct investment surged 20 per cent to US$3.9 billion (S$4.9 billion) last year, even as the world economy suffered from a debt crisis in Europe and partial tapering of the United States Federal Reserve's huge bond-buying programme.

"The Philippines has consistently bucked the global trend, with economic growth remaining high, and even surpassing our targets," said Mr Aquino.

He also cited the investment-grade ratings that the Philippines received from Standard & Poor's (S&P), Moody's and Fitch Ratings as "proof positive… that we can reach greater heights".

This month, S&P again upgraded the country's credit rating, to two notches above junk status.

The ratings agency said "ongoing reforms to address shortcomings in structural, administrative, institutional and governance areas will endure beyond the current administration".

Mr Aquino is due to step down in 2016.

Pundits, however, say there are still flaws in its growth story.

Critics point out that only 0.01 per cent of the population is benefiting from the growth, with the wealth of the 40 richest Filipino families equivalent to 76.5 per cent of the GDP increase in 2012.

Some 19.7 per cent of the population, or 23.75 million Filipinos, are living below the poverty line. Unemployment is still high, at 7.5 per cent, while 19.5 per cent of Filipinos are underemployed.

Despite these flaws, the Philippines is still seen as faring better than its China-dependent neighbours Malaysia and Indonesia, and crisis-stricken Thailand.

Mr Rajiv Biswas, chief Asia-Pacific economist at research firm IHS, said Malaysia would take the worst hit from a hard landing in China in 2016 and 2017, when growth in Malaysia would be lower at 3.5 per cent for each year from a projected "baseline" of 5 per cent.

Indonesia will experience "transmission shocks" as coal prices fall due to dwindling demand from a cooling China.

ASEAN is particularly vulnerable to a Chinese hard landing as its exports to China have grown by 20 per cent over the last decade.

This article was first published on May 22, 2014.
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