MANILA, Philippines – Emerging markets, including the Philippines, may expect a larger piece of the foreign investment pie as soon as investors get over their aversion to risks, spurred by an improvement in the global economic climate, according to the Bangko Sentral ng Pilipinas.
BSP Governor Amando Tetangco Jr. said the United States and other industrial nations would recover from the global downturn, but their growth rate would be slower than pre-crisis levels.
“This will result in a new balance of risk preferences, where some emerging markets would surface as relatively attractive investment alternatives,” Tetangco told reporters.
Investors are starting to prefer emerging markets, citing their resilience in the face of an economic crisis, he added.
In the case of the Philippines, he said, the country’s financial sector remained virtually unharmed by the global turmoil. Even if there had been tightening of credit standards caused by risk aversion among lenders, he said, credit was still growing at a double-digit pace.
Also, the banking sector is expected to remain profitable this year, he added.
Another monetary official said very low interest rates in industrialized nations—with that in the United States already nearing zero—would help make emerging economies more attractive to investors.
Even when the crisis starts to wane, observers said, policymakers in advanced economies could not immediately raise interest rates and reverse all stimulus measures that have been implemented to counter the economic downturn.
The “exit strategy” is likely to be implemented in a gradual manner. As a result, interest rates in the advanced economies would likely remain low for some time.
“As long as fiscal situations are well managed, more investments will come to emerging economies,” the monetary official said.
He added that investors would likely place their money in emerging markets like the Philippines, where interest rates are higher and economies are relatively strong.
The Philippine economy, as measured in terms of gross domestic product, grew by 0.4 percent in the first quarter of the year.
This may have been the slowest pace in 10 years, but the country continues to remain afloat, while other, more advanced economies, are still in the grip of a recession, economic managers said.
For the entire year, the government expects the Philippines to grow between 0.8 and 1.8 percent.
Although the world economy is still in a crisis, there has been a gradual movement toward stabilization, benefiting some emerging economies in terms of increase in foreign portfolio investments.
The Philippines, for instance, registered a net inflow of $199.22 million in “hot money” in the first half of the year, reversing the net outflow of $636.27 million seen in the same period last year. –Michelle Remo, Philippine Daily Inquirer
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