The Philippines is in the best position to withstand a potential slowdown of growth in China due to the country’s relatively low China-bound exports compared to peer countries in the region, a unit of the international credit watcher said.
In a recently published research note, Moody’s Investors Service said Asean countries are vulnerable to a pronounced growth correction in China. This was traced to the region’s rapidly increasing trade exposure to China in recent years.
Against that background, the Philippines was rated the “most insulated” country from any Chinese economy slowdown due to the diminished economic significance of China-bound exports over the past decade.
Moody’s said while Asean member- countries have an aggregated exposure to Chinese demand equal to 12.2 percent of local output in 2013, the Philippines had an exposure of below 3 percent during the year. “The headline data suggest that the Philippines would be the least impacted by a significant downturn in Chinese demand,” Moody’s said.
“Instead, the Philippines’s growth story has been underpinned by robust domestic demand, which has, in turn, been fueled by structural reform and an upswing in the country’s credit cycle,” the Moody’s unit added.
Additionally, the unit said a possible downturn in the Chinese economy could even have positive effects on the country, as this can potentially help push domestic prices lower. “The Philippines would feel some positive spillover impact from weakening Chinese demand, as lower commodity prices would serve to keep a lid on consumer prices despite the strength in domestic consumption,” Moody’s said.
Written by: Bianca Cuaresma