MANILA, Philippines - Standard Chartered Bank (SCB), the longest-serving foreign bank in the country, has plotted continued but significantly slower growth for the Philippines this year against a background in which Greece were to leave the 17-nation European Monetary Union.
Central bankers around the world, the Bangko Sentral ng Pilipinas (BSP) included, have entertained the likelihood of a Greek exit and its impact on the economic future of countries with trade and investment relations with euro-zone countries.
In the event Greece leaves the monetary union but the spillover or contagion was contained, then Manila should be able to grow by 2.7 percent this year and by 4.4 percent in 2014, SCB said in a research note analyzing the economic impact of such an event.
Under a disorderly exit scenario in which there was contagion spreading across Europe, SCB said growth in Manila was limited to 1.8 percent this year and only 3.1 percent next year.
This compares with official forecast in which growth was seen expanding by 5 percent or 6 percent this year.
Actual first-quarter growth stood at a higher-than-expected rate of 6.4 percent no matter the slow external demand traced to the sovereign-debt crisis in the euro zone.
SCB originally forecast Philippine growth averaging 3.2 percent this year and only 5.3 percent next year in recognition of the limited and temporary impact of a Greek exit on the growth of emerging markets like the Philippines.
“We assess the effects of a Greek exit from the European Monetary Union on our footprint markets of Asia, Africa and the Middle East. If contagion is contained by European Central Bank [ECB] liquidity injections, which is our core scenario, any negative impact on emerging-market growth is likely to be limited and temporary.
“We also expect emerging-market central banks and governments to take the necessary action to stimulate their economies. If the European authorities fail to contain the fallout from Greece’s exit, leading to exits by other EMU members, the economic and financial impact on emerging markets could be comparable to the 2008-09 global financial crisis,” SCB said.
The bank’s forecast growth path for the Philippines mirrors that drawn earlier by the International Monetary Fund (IMF), Moody’s Analytics, HSBC and even by ANZ Research.
The IMF reiterated forecast growth of only 4.2 percent this year and 4.7 percent next year while Moody’s, which earlier saw the economy expanding at a rate of 4.7 percent, scaled it back to only 4 percent instead.
HSBC, one of the four original foreign banks to establish its presence in the country, also scaled back its forecast growth to only 4.3 percent from 5.2 percent.
ANZ Research said growth averaging 5 percent this year should be possible. Its analysts said Manila has “inched closer to investment grade” this year and anticipate higher foreign-capital inflows.
But more important, ANZ analysts said it should take a “sizable external setback or moderation in external demand to restrain [the country’s] GDP to less than 5 percent in 2012.”