RP, SEA recovering faster than others, says ADB

MANILA, Philippines – The Philippines and other Southeast Asian (SEA) economies are recovering faster from the global economic crisis than the rest of Asia and the emerging markets, the Asian Development Bank (ADB) said in a study.

But for the long term, the ADB said these economies must make financial, fiscal and structural adjustments to buffer themselves against future shocks.

The study said the Philippines should expect good growth for 2010 as remittances from overseas Filipinos, rebuilding efforts due to typhoon damage and spending related to the May national elections, are expected to spur growth.

The ADB had forecast that the Philippine economy likely expanded a mere one percent in 2009 but will surge forward by 3.3 percent this year.

“Remittances from its millions of overseas workers played a vital role in cushioning the country from the worst effects of the crisis, but in the long run, it will have to reduce its reliance on this income source, and look to diversify the economy,” the study, which covered Indonesia, the Philippines and Thailand, pointed out.

The Philippine government estimated that remittances grew at least four percent in 2009 and forecast growth of between six to eight percent this year.

The three SEA developing economies were initially hurt by the sharp slump in demand for exports and outflows of foreign capital that emerged during the crisis, the ADB said. But they have been able to rebound relatively quickly, aided by both their own internal actions such as stimulus packages and the swift action taken by developed countries to avert a prolonged slump.

The study particularly points to the much greater resilience of most Southeast Asian economies compared to the 1997-1998 Asian financial crisis.

It noted that Indonesia was able to put in place swap lines and other financial support arrangements to restore investor confidence, thanks to policy measures taken since 1997.

Record prices received for commodities in the years preceding the slump also helped provide a savings buffer for rural households.

Sharp outflows of foreign capital and the fall in value of the rupiah in late 2008 could have hurt the country badly if the domestic economy was not as resilient and if steps had not been taken globally to boost investor confidence.

“Indonesia remains vulnerable to financial shocks so the financial dimension of the economy still requires policy attention,” the study noted. –Ted P. Torres (The Philippine Star)