Philippines economy

Chronic congestion at the Philippines’ biggest port is forcing Maersk Line, the world’s biggest container shipper, to treble the frequency of container services that it diverts to an alternative port 130km away to keep goods flowing in and out of the country.

The snarl up highlights the infrastructure bottlenecks that are threatening the Southeast Asian country’s ability to maintain the rapid growth of recent years.

While creaking infrastructure has long been a problem in the Philippines, it is being exposed as a serious constraint amid a flood of foreign investment in the country, which has helped turn it into a star performer in Asia. 

While the world’s media has focused its attention on Tacloban, the biggest city affected by Typhoon Haiyan, other places on the island of Samar have been badly hit. Basey is one such town. Just across the bay from Tacloban, it has received very little in the way of aid or assistance from the government in spite of extensive damage. Tom Griggs reports.

It’s hard to imagine the scale of destruction following the typhoon that hit the Philippines on Friday, killing an estimated 10,000 people and leaving a trail of devastation.

However, despite Haiyan being one of the strongest typhoons ever recorded, the impact on the Philippines economy may be relatively slight, and the reconstruction effort may even boost GDP. While that is hardly a comfort to people without homes or in mourning, an economic slump would be a double whammy better avoided. 

There was plenty of thinly-veiled gloom in the World Bank’s semi-annual update on the economies of East Asia. It expects the region to growth at 7.1 per cent this year, down from its projection of 7.8 per cent six months ago. Most of that is down to falling growth in China, though all the countries covered are experiencing problems of some sort.

All except one, that is: the Philippines. 

Moody’s Investors Service on Thursday lifted the Philippines’ credit score one notch from Ba1 to Baa3, becoming the third international credit rating agency to give the southeast Asian country an investment-grade rating. It said the Philippines’ ratings outlook is positive, making another upgrade possible in the next year and a half. 

In another sign that the benefits of faster economic growth in the Philippines have yet to trickle down, the country’s jobless rate in April rose to 7.5 per cent, the highest in almost four years, the government statistics office said Tuesday.

That is roughly in the same quarter that GDP surged 7.8 per cent, the highest in more than two years. Asia’s fastest growing economy also has one of the region’s biggest unemployment problems. 

The Philippine economy grew 7.8 per cent in the first quarter from a revised 6.8 per cent the previous quarter, beating analysts’ expectations of an increase of just 6 per cent, as sharply higher investments and government spending offset the impact of faltering demand from China, America and Europe that slowed economies elsewhere in the region. 

The Philippines has some news to cheer: Standard & Poor’s, the rating agency, has bumped up its credit rating one notch to ‘BBB-’.

Which means it has become the second agency after Fitch to put the country’s long term foreign debt at investment grade. One is good news; how significant is two? 

Fitch Ratings on Wednesday gave the Philippines its first investment grade in a move that highlights the economic progress made under president Aquino and paves the way for boosting foreign investment.

The news will be music to the ears of reformist finance minister Cesar Purisima (pictured) who told FT journalists this week: “Good governance is good economics. I think we have shown that.”

Manila will now hope either Standard & Poor’s or Moody’s also lifts the country to investment grade as two such ratings are needed for many fund managers to invest in a country’s bonds. It may not be a long wait. 

Electronics companies need strong nerves in the face of the industry’s inherent volatility. Analysts had expected the Philippines to see a solid gain of around 6 per cent in exports in January. In the event, Manila on Tuesday posted a 2.7 per cent decline – thanks largely to a 32 per cent plunge in electronics shipments.

The next few months should be better, given the signs of recovery in the US. But the unpredictability of the markets make life tough for the electronics groups and their suppliers. 

The First Philippine Industrial Park, some 50km south of Manila, is already a whopper, accounting for about 3 per cent of the country’s total exports. Which is why it is notable that Sumitomo Corporation, the Japanese trading house that owns 30 per cent of it, wants to make it even bigger. 

The Philippine economy grew 6.6 per cent in 2012, accelerating from just 3.9 per cent growth the previous year. That’s good news for investors whose confidence in the southeast Asian nation is already remarkably strong. Just in the past four weeks, the stock market (see chart left) has breached closing records a dozen times. 

When Saudi Arabian investors suddenly needed to sell an 80 per cent stake the unfinished Fairmont Hotel and Raffles Suites and Residences project in the Philippines’ Makati financial district late last year, their local partner lost no time stepping up to the plate.

It probably helped that the Saudis’ local partner was the Ayala Corp, the Philippines’ oldest business house. In short order, the Filipino group bought out the Saudis for $24m and went on to complete the project’s 280 rooms, 32 suites and 237 serviced residential units in time for the peak Christmas season. The hotel opened its doors at exactly 3:33 pm on December 3. 

The Philippine economy unexpectedly surged in the quarter ending in September, growing by 7.1 year-on-year from a revised 6 per cent in the previous three-month period, as well-timed monetary easing and accelerated government spending helped counter the effects of the global and regional slowdown.

In the first nine months of the year, the Philippines grew 6.5 per cent compared to 3.9 per cent in the same period last year, according to the government National Statistical Coordination Board