The Philippines has sufficient insulation against foreign exchange-driven shocks as the country’s foreign-currency assets have since exceeded liabilities, according to the Metropolitan Bank and Trust Co (Metrobank).
Metrobank Assistant Vice President and Research Head Marc Bautista, the country’s forex reserves are higher than its private- and public-sector external debt, and that the economy is really domestic consumption-driven.
These factors help make the country deal with macroeconomic challenges better than its neighbors in the region.
“The level of consumer debt is also relatively low compared to our Asean peers, running at around 7 percent GDP, whereas the major Asean economies run double-digit debt levels. This means there is still room to grow and expand household consumption spending,” Bautista told the BusinessMirror.
Additionally, Philippine banks have relatively high levels of capital given the very proactive stance of the Bangko Sentral ng Pilipinas (BSP) in ensuring a stable-and robust-banking sector.
“There is still much room for growth that the banking industry can fuel,” he added.
RCBC Forex Brokers Corp. President and CEO Joseph Colin Rodriguez believes that having a consumer-driven economy helps the country weather the shocks from other countries that are having problems.
He said the Philippines has learned its lesson from the 1997 Asian financial crisis.
According to him, banks make sure that housing borrowers continue to put up adequate equity when they borrow to purchase new homes. Banks are also mandated to be more strict on second home purchases.
Indeed, the Asian financial crisis helped the BSP formulate lending policies with an eye against future credit crises in mind.
It was noted that continued Philippine economic expansion has speedied up despite the global weakness, according to First Metro Investment Corp., Metrobank’s investment-banking unit.