The Philippine economy has surged to record the strongest growth in Southeast Asia, in an early boost for President Rodrigo Duterte’s efforts to court investors and calm business fears about the impact of his tilt from the US to China.
Gross domestic product rose by a faster than expected 7.1 per cent year on year in the three months following the new leader’s June 30 inauguration. It is on track for full-year growth of 6-7 per cent, officials said on Thursday.
The numbers predate Mr Duterte’s October trip to China, during which he dramatically announced Manila’s “separation” from its long-time ally Washington. But they suggest the economy suffered no immediate fallout either from the president’s bloody war on drugs or his forthright style, which has led him to insult figures ranging from President Barack Obama to Pope Francis.
Growth potential in Southeast Asia’s second most populous country remains good although the unpredictability of policy making in Manila and now Washington under president-elect Donald Trump are a concern, said Capital Economics, the research consultancy.
“With Duterte in charge it is hard to rule out a sudden shift in economic policy or a disruption of the political stability that has characterized the last six years,” said Gareth Leather, senior Asia economist. “Either would cause sentiment to sour and growth prospects to weaken.”
Sectors including construction, food manufacturing and agriculture drove the Philippines to an improvement on the 6.2 per cent expansion achieved in the third quarter of last year. The Philippines’ 70th consecutive quarter of growth highlights how the country has become an economic star in a Southeast Asian region where financial and political turbulence has damped prospects elsewhere.
The much larger Chinese economy grew 6.7 per cent in the three months to the end of September.
Mr Duterte has approved $5.5bn of spending on roads, railways, ports and airports, doubling the value of public works projects launched since he began his six-year presidential term, his office said this week. His China trip yielded $24bn in loan and investment pledges in sectors such as infrastructure and mining, in an effort to address the Philippines’ historically low levels of foreign direct investment compared with some neighbors.
But skeptics also point to significant risks, including that some of the proposed China deals may either not materialize or be less good than anticipated for the Philippines.
Some western businesses have also grown nervous and delayed trade missions or new investments because of Mr Duterte’s criticisms of the US, according to the American Chamber of Commerce of the Philippines. The US is an important prop for the Philippine economy in areas ranging from multinationals’ back-office operations to remittances from Filipinos who live and work there.