IT is getting to the point that almost everything “bad” that happens in the world is good for the Philippines.
The Bangko Sentral ng Pilipinas was the second country after Malaysia to raise interest rates this year. The gloom-and-doomers have been saying for two years an increase in interest rates, especially in a small backwater country like the Philippines, would mark the end of the good times.
The fact is the interest-rate increase was a major positive policy move for the country as it put the brakes on the increasing inflation rate. Further, while the experts have been saying that the US Federal Reserve would be raising its interest rates at any time, that did not happen, making Philippine debt interest rates more attractive.
The appreciating US dollar was also expected to bring damage to the Philippines as exports and remittances would suffer. But that did not happen either as both merchandise exports and remittances still continue to grow.
Part of our interpretation problem with the data is that we look and worry too much about the current growth rate versus the previous growth rates. This is like saying the basketball team do not do as good this time because they only won by 5 points and in the previous game the win was by 10 points.
Conditions are never the same from quarter to quarter and year to year so, therefore, the comparisons are not always comparable. What we need to see is continuing growth and that is what we are getting.
Japan’s economy is tanking having just gone into another recession. Corporate bankruptcies are skyrocketing. But like I wrote about a couple of months ago, Japanese companies are desperate to get part of their money and part of their business interests out of Japan. The Philippines is definitely on their radar as evidenced by Thermos Co. opening a manufacturing facility in Batangas province and investing P1.6 billion to do it.
Now the world is in a panic due to the nearly 40-percent decrease in the price of crude oil over the last three months. Commentators do point out that a few major oil-importing countries like Japan, India and the Philippines will benefit from a lower oil-import bill. But even then, the analysis always concludes there is a major risk because all the exporting nations will be hurt and that is not good for the world economy.
One expert gave 10 reasons lower oil prices would be terrible. Lower prices are actually not significantly beneficial to consumers. Having just bought unleaded gasoline at P40 a liter, I beg to differ. If gas stays at this price for three months, I will have saved enough for a new laptop.
One local commentator says that low oil prices will reduce the number of Filipino workers in the Middle East. Where is the logic in that, unless Saudi Arabia decides to terminate Filipino nurses working in their hospitals because of low oil prices? Further, the Middle Eastern producers all intend to keep the oil production at current levels, so why would our oil workers be fired?
Low oil prices could hurt the global banks because they are carrying what could become bad loans of the oil-field operators. Good. Our Filipino banks do not have exposure to those loans anymore than they had to the subprime mortgages back in 2007. And the investors in those loan packages might do well to consider investing in a country and in companies that keep getting credit- rating upgrades.
Notice something else. All the negative outlooks for the Philippines, whether it is the corporate debt of the conglomerates or the property sector, always are qualified with the word “if.”
If remittances go down, the property sector could be damaged. If interest rates go too high, the conglomerates might have debt-service problems.
There is a large group of people outside and inside the Philippines that hate the fact that this country is starting to prosper. It is tough to ever hear much positive commentary about the country. But that is good and we need to listen to their worries. An economy and stock market like ours always climbs the wall of worry.
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@mangunonmarkets. PSE stock-market information and technical analysis tools provided by the COL Financial Group Inc.
1 comment
“There is a large group of people outside and inside the Philippines that hate the fact that this country is starting to prosper.”
Perhaps because it didn’t happen on their watch? LOL.