Low interest rates seen fueling investments in PH

The Philippines stands to benefit from an investment boom in the coming years fueled by prevailing low interest rates, according to the regional unit of an international accounting organization.

At the same time, however, the Institute of Chartered Accountants in England and Wales (ICAEW) warned that remittances of overseas Filipino workers into the country are expected to slow down this year—a phenomenon that could potentially cap the economic growth rate.

In its “Economic Insight: South East Asia” report produced by the Centre for Economics and Business Research, ICAEW said, however, that the expected decline in dollar remittances would be offset by strong domestic consumption, resulting in a GDP growth rate of 4.1 percent for 2012.

“A strong mandate for the new Aquino government should encourage investor interest in an ambitious infrastructure program that could help the country achieve output expansions of 3.7 percent in 2013 and 4.2 percent in 2014,” the report added.

The report noted the “remarkable reversal of fortune” that now sees “formerly risky countries like Indonesia and the Philippines” paying less to borrow from international capital markets compared to many eurozone member states.

“Money has also become more affordable for Asean governments as investors have flocked to the region, looking to park their funds in safer public debt,” the report said.

With real interest rates at record lows, ICAEW said governments and companies were expected to increase investment in assets and infrastructure.

“Cheap money will allow countries in Asean to fund investments in public infrastructure, from transport links to education systems, while low returns in the financial markets are likely to prompt companies to invest in machinery, technology and skills instead,” the group added.

“With the availability of cheap money for Asean governments, we expect that public investment in needed infrastructure will increase this year,” ICAEW economic advisor and CEBR’s head of macroeconomics Charles Davis said.

CEBR’s forecast for the average infrastructure investment growth between 2012 and 2014 is 5.2 percent for Thailand, on the back of reconstruction efforts after last year’s floods.

Other Asean countries are also expected to increase infrastructure spending: Vietnam by 8.1 percent; Indonesia by 9.1 percent, focused on the mining sector and sectors serving household consumption; and Malaysia by 6.8 percent.

Countries like Thailand, Malaysia, Philippines and Indonesia remain positive with domestic demand continuing to fuel growth, the report said, but noted that falling commodity prices and the falling remittance from overseas citizens may impact Indonesia and the Philippines, respectively. –Daxim L. Lucas, Philippine Daily Inquirer