THE PHILIPPINES figured as the “emerging market” most resilient to potential external shocks in a paper authored by an analyst at the Center for Global Development, a Washington D.C.-based nonprofit think tank.
In a February report, titled “Emerging Market Macroeconomic Resilience to External Shocks: Today versus Pre-Global Crisis” that was e-mailed to reporters last Apr. 2 by the government’s Investor Relations Office, economist Liliana Rojas-Suarez ranked 21 countries according to how each one is likely to fare in the event of a global economic downturn that could be triggered by a prolonged low inflation environment in Europe, as well as from a looming monetary policy normalization in the United States.
In assessing the economies, Ms. Rojas-Suarez looked at seven “resilience indicators,” namely: current account balance as a ratio of gross domestic product (GDP); ratio of external debt to GDP; ratio of short-term external debt to gross international reserves; ratio of general government fiscal balance to GDP; ratio of government debt to GDP; inflation; and domestic liquidity.
She then compared the values of the indicators in 2007 — the year before the global financial crisis broke out — with respective values at the end of 2014.
She noted that “conditions in the period before the eruption of an adverse external shock are central in determining the resilience of an emerging market economy to the shock.”
Measured against the indicators drawn up in the paper, the economist said the Philippines “occupies the first position in the ranking.”
Ms. Rojas-Suarez specifically cited the country’s reduced external debt ratio, which fell to “around 20% in 2014… from around 40% in 2007.”
Moreover, “reductions in the government debt-to-GDP ratio in the Philippines” also make the country the most prepared emerging market economy to deal with a possible downturn the global economy.
Finally, the Philippines “stands out for [its] much-improved performance in inflation in 2014 relative to 2007.”
Ms. Rojas-Suarez said a country is deemed “highly resilient to adverse external shocks if the event does not result in a sharp contractions of economic growth, a severe decline in the rate of growth of real credit and/or the emergence of deep instabilities in the financial sector.”
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The Philippines, Colombia, Czech Republic, Romania, Lithuania, Estonia, and Latvia are said to have emerged better off after the 2008 global financial crisis.
On the other hand, those that have worsened since then are Chile, Indonesia, Malaysia, Brazil, Poland, India, and Argentina.
In comparison, South Korea, China, Thailand, Peru, Mexico, Bulgaria, and Hungary remained relatively stable after the crisis.
In terms of regional groupings, Ms. Rojas-Suarez said “Emerging Europe” (consisting of Bulgaria, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland and Romania) emerged as the “most improved” as economic imbalances in the pre-crisis period “are now being corrected.”
On the other hand, Emerging Asia (China, India, Indonesia, South Korea, Malaysia, the Philippines and Thailand) is “relatively not as resilient to external shocks as it used to be,” while “unfavorable terms of trade [and] the squandering of opportunity to implement needed reforms in the good post-crisis years” make Latin America (Argentina, Brazil, Chile, Colombia, Mexico and Peru) the least resilient. — Daryll Edisonn D. Saclag, Businessworld
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