||Asean Affairs 11 June 2013
Philippines’ capital-goods imports rising
The Philippine growth story, which has been largely consumption driven, is expected to continue to rise on strong consumer-goods imports but the country’s capital-goods imports are also increasing with more domestic investments.
According to a global research report from Standard Chartered Bank (Stanchart), among ASEAN nations, the Philippines has the highest share of capital-goods imports relative to total imports but the investment-to-gross domestic product (GDP) ratio is the lowest compared to Malaysia, Indonesia, and Thailand. This fact is further “inflated” by the low ratio of overall imports to GDP.
“Given the government’s current investment drive, we expect the Philippines to import even more capital-goods as investment growth accelerates over the next few years,” Stanchart said. “This reflects government efforts to upgrade their economies and positive domestic investor sentiment.”
In comparing ASEAN countries’ consumer-goods imports with total imports, Stanchart said the Philippines has the highest ratio of consumer-goods imports, followed by Indonesia, Malaysia and Thailand.
As such, domestic consumption has always been a lead growth driver for the country and consumer-goods imports have a fairly large share in the import receipts.
Stanchart noted that for all four countries, there seemed to be an increasing trend for consumer-goods imports relative to total imports. “This reflects the region’s growing affluence and increasing reliance on domestic consumption for growth,” said the bank’s economists.
They further assessed that the increase has come at the expense of slower intermediate-goods imports amid weaker external demand. With the bottoming of the imports of intermediate goods around the region, capital-goods imports are relatively strong. “This is a positive sign for domestic investment momentum,” said Stanchart.
But compared to previous years, the pace of consumer-goods imports is also slowing, except for the Philippines. “While domestic growth drivers have been supporting ASEAN growth, consumption is starting to slow, partly due to the high base and the inescapable correlation between domestically and externally oriented sectors.”
Stanchart has noted ASEAN’s growing affluence and although the region is “still poorer than the world” it is improving. “ASEAN countries – particularly Indonesia, the Philippines and Malaysia – have continued to grow close to or above trend growth in recent years, despite poor external conditions. The growing affluence of the domestic population, relatively healthy fiscal positions, a largely stable political environment and strong liquidity inflows are lending resilience to economic activity, even as external demand falters,” said Stanchart.
The Philippines recorded a first quarter GDP growth of 7.8 percent, higher than China and Indonesia, and this is supported by construction and manufacturing growth, as well as consumer spending and state expenditures.
Since with the still weak global demand, the country’s exports are not seen to recover soon. This means growth will still be driven by domestic consumption. For 2013, the government is hoping GDP will grow six percent to seven percent from 6.1 percent in 2012.