On the Philippine Daily Inquirer: Economy seen on brink of ‘miracle decade’

THE PHILIPPINES is on the brink of what could be a “miracle decade” and likely to withstand any discrimination that emerging markets will bear in the current volatile global market environment, visiting Citigroup market experts said.

The balance for the Philippines is positive at this point and growth is happening even with a scant share of foreign direct investments (FDIs) compared to its neighbors, according to Francisco Ybarra, Citi Global head of markets.

Brazil is a good model for the Philippines on how to increase investments, the London-based Ybarra said in an interview. “You build the basis for upgrading to the next level of growth, continue reforming, and making sure investments happen.

“We’re talking about a miracle decade for the Philippines and this could be it,” Ybarra said.

“The Philippines is an unnoticed, unheralded miracle. You have very strong growth, inflation is coming down and the current account is not deteriorating,” said Singapore-based Nadir Mahmud, managing director and head of markets for Asia-Pacific. “In many ways, it is an outlier and highly sucessful. Some of these positives have been noticed given the recent (sovereign credit-rating) upgrades but by and large, the investor community has yet to wake to recognize all the good things that are happening.”

Growth Story

What many would like to see was for the government to turn the momentum into a long-trem growth story, Ybarra said, adding that he was not too worried that the Philippines was getting a little share of foreign direct investments (FDIs) compared to its regional peers at present.

“FDIs follow opportunities and it’s not something that the Philippines needs now. If you have an avalanche of FDIs, it could be problematic in some way because you’ll cause overheating. But clearly the government has its own macroeconomic plans and investment is a part of those,” Ybarra said.

Ybarra said attracting investments would require infrastructure and noted that this was actually what the government was doing right now: Sustaining a good environment that included the rule of law, clarity, and consistency, all to make it easier for private investments to happen.

“They have clearly done a good job of improving those things,” Ybarra said. “If you look at other countries – some have been darlings of the market for a while but they haven’t been able to use that to improve their conditions. And when the market turns, they don’t have a real source of growth.  From where we sit, the most important thing is to continue the path of creating transparency and fighting corruption


Ybarra sees the downturn in emerging markets lasting shorter that that in developed markets, despite the former being out of flavor at the moment. In this regard, he said the Philippines could stand out in many dimensions. “It is well protected and I think if the market discriminates, it will discriminate in favor of the Philippines. The Philippines will not be subjected to the same pressures,” he said.

Asked about risks of policy reversal after the term of President Aquino, who has adopted good governance as a battlecry of his administration, Ybarra said that when a nation’s population has experienced the benefits of macroeconomic discipline, it would become core to any politician and would be difficult for any succeeding administration to alter because the population would react.

“The Philippines may be lucky to experience that in a way that implies maturity. Long-term growth is what the Philippines needs and has the potential to acquire. If my little theory has any value,  I don’t think everything hinges on the next president as long as the Philippines continues on this path in the next few years,” he said.

Asia, as a whole, could face some substantial slowdown but as a block, it has the “firepower and policy space” to tackle the issue by embarking on strong counter-cycling measure, Mahmud said.


– Doris C. Dumlao

Featured by the Philippine Daily Inquirer, 19 August 2013