Web_PhillippinesInfra_iStock_000023747736_Large.jpg

Manila, Philippines at rush hour

Some had thought the president’s anti-US rants and brutal crackdown on drugs combined with US president Donald Trump’s protectionist outlook could derail growth, but the Philippines has repeatedly proven its resilience.

Today’s figures are the latest sign that the economy will not falter. According to the Philippine Statistics Authority, growth in the final quarter of last year hit 6.6%, pushing growth for the entire year up to 6.8% and keeping the Philippines on par with its booming Asian neighbours.

Duterte seems to have instead brought the country’s already vibrant economy an additional boost in the form of $160bn worth of planned infrastructure spending, despite lowering expectations by cutting the government’s growth forecasts and widening its expected deficit in the first few months of taking office last summer.

The PSA said manufacturing, trade, real estate, renting and “business activities” were the main drivers of growth for the quarter.

The country’s younger population and growing middle-classes are also helping to drive and vitalise the economy. Along with Vietnam, the Philippines is one of Asia’s late-bloomers. After trailing behind the country’s former powerhouses, they are now beginning to overtake them.

Growth in the Philippines this year has outdone that of China, for example, which posted at 6.7% in 2016 according to official figures published last week.

One thought of as the ‘sick man of Asia’, the Philippines is now expected to record strong growth for the next few years.

In a note published today responding to the figures however, analysts Gareth Leather and Krystal Tan at Capital Economics warned that in the medium term, the outlook “has become much less certain”.

While the economy seems so far undeterred by Trump’s protectionism, the reality of his planned policies has yet to take root.

Leather and Tan noted that the Philippines business process outsourcing sector brought in revenues equal to around 10% of GDP last year – it is estimated that around three quarters of that revenue comes from servicing US companies.

“If Trump puts pressure on American companies to bring this work back to the US, the sector would be hit hard,” the analysts explained, adding that both remittances to the Philippines (equivalent to 3% of GDP) and exports (4% of GDP) could also be affected.

“Closer to home, the country’s own president is continuing to unnerve investors with a series of controversial and erratic comments,” they continued.

One of Duterte’s most radical policy areas has been his declared a war on drugs, which has so far seen the extrajudicial killing of dealers by police, the president entice vigilantism and threats to impose martial law.

“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 characterised the last six years,” Leather and Tan wrote. “Either could cause sentiment to sour and growth prospects to weaken.”