PH least hit by China slowdown

The Philippines is among the few Asian countries that will weather the impact of the slowdown in China’s economy, global debt watcher Fitch Ratings said Friday.

Fitch cited in its latest report the Philippines, along with Indonesia, Malaysia, and Thailand as the economies that would not likely be affected too much by the slowdown in the world’s second biggest economy.

“The Asean countries [Indonesia, Malaysia, Thailand and the Philippines] would be less affected, with GDP gap reaching around 2pp [percentage points] by 2017 in all four countries. Exchange rate flexibility will help mitigate the shock, including the increase in risk premium, while the delay in the Fed tightening would have some positive effects,” Fitch said.

Fitch said Australia would be affected, with a 1.8-pp GDP impact by 2017. “This is the net effect of the large exposure through direct trade channels to China and the counter-cyclical policy

options available to a developed country with sound fundamentals,” it said.

Fitch said the “ultra-open Asian economies” of Singapore, Hong Kong and Korea would be hit the hardest by the shock with a cumulative effect on gross domestic product “reaching 3 pp, 4.5 pp and 4.3 pp by 2017, respectively.”

Taiwan would experience a 3.3-pp impact on GDP. India would be less affected by falling demand in China, but the increasing risk premium complicates the monetary policy response to the shock, it said.

Brazil would also be hit by a risk premium shock on top of the lower commodity prices and contraction of exports to China. In Russia, the lower oil prices play a major role in propagating the shock. The cumulative effect would be 1 pp in India, 3 pp in Brazil and 2.8 pp in Russia, it said.

Standard Chartered Asian economist Jeff Ng earlier said in a news briefing the Philippine economy had become more domestic market-oriented at the expense of the external sector.

“Private consumption has increasingly been supported by remittances, rising per-capita income from low bases and improving trend employment rates,” Ng said.

He said the economy would also be likely more resilient to external shocks than in 1992 and 1998. He said GDP would likely improve to 6 percent in 2016 from 5.7 percent in 2015.

Fitch, in its economic outlook, said the global economy would grow by just 2.3 percent in 2015, the weakest since the global financial crisis in 2009, dragged down by a recession in Brazil and

Russia and a structural slowdown in China and many emerging markets.

It said growth would pick up to 2.7 percent in 2016 and 2017.

Growth in major advanced economies was seen to strengthen to 2 percent in 2016, the fastest since 2011.

“ Emerging markets are becoming an increasing source of global growth risks as the collapse in commodity prices and political shocks exacerbate a secular slowdown. Our baseline forecast for China is a gradual slowdown to 6.3 percent in 2016 and 5.5 percent in 2017, from 6.8 percent in 2015,” Fitch said.

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