THE recent bouts of volatility in the local markets—particularly in the stock and foreign-exchange markets—brought about by developments in the global front are seen to have no significant effect on the country’s economy down the line, an international research institution said.
“Admittedly, the Philippines has been caught up in the recent market turmoil. Its stock market fell sharply on Monday [last week], and it is down by almost 6 percent [in the previous week]. However, the declines so far are unlikely to be enough to make much difference to the real economy,” Capital Economics for Emerging Asia said.
In the previous week, the stock market and the foreign-exchange market both hit steep drops, following the recent news from China’s domestic economy, particularly on the devaluation of its currency and the slump of its manufacturing data.
Likewise, Bloomberg said in a recent article that its most recent Bloomberg-JPMorgan Asia Dollar Index showed that the Philippines moved along the pack in the movement of currencies in August this year.
“Vietnam’s dong lost 2.9 percent in August, heading for its biggest decline since February 2011, as
authorities devalued the currency for the third time this year and also widened its trading band in response to China’s depreciation. Elsewhere in Asia, India’s rupee weakened 3.2 percent against the dollar this month. Taiwan’s currency fell 2.6 percent, Thailand’s baht dropped 2.5 percent and the Philippine peso declined 2.2 percent,” Bloomberg said.
According to the research institution, the Philippines has nothing to worry amid the volatilities, as it remains relatively insulated from the shocks emanating from China.
“Among Asian economies, the Philippines has relatively little exposure to China’s domestic economy, concerns over which have been the main cause of the market sell-off. As far as the peso is concerned, the recent drop against the US dollar has been mild compared with those of other emerging-market currencies and is unlikely to worry the central bank,” Capital Economics said.
The research firm also expressed confidence that the country will be on the road to recovery, although the lower-than-expected results in the first half warrant a downgrade in growth forecast.
“In light of today’s slightly disappointing data, we are taking down our growth forecast for 2015 from 6 percent to 5.7 percent. However, that still factors in some further recovery over the coming quarters, and we are keeping our forecast for next year unchanged at 6.5 percent,” Capital Economics said.
“Conditions in the domestic economy look healthy, and a continued recovery in exports should help drive a further pick-up in growth over the coming quarters,” they added.