6.6% in 2012 and 7.8% in Q1 2013
driven by strong internal demand
◗;There is a reliable stream of remittances from Filipinos working
abroad, supporting consumption
and the current account.
The Philippines achieved sustained
growth of 6.6% in 2012, despite weak
demand in Europe and the United
States. The main driving force was
household consumption, which accounts for 70% of GDP. Household consumption will continue at a sustained
level thanks to a rapid expansion of
credit and remittances from expatriate workers (over 7% of GDP).
In terms of supply, the business
process outsourcing (BPO) sector has
seen very strong growth over the
last 10 years and now accounts for
approximately 5% of GDP and 25% of
exports. The call center sub-sector
now employs more people than it does
in India. The construction, financial
intermediation and property sectors
are also experiencing rapid growth.
The main risk is a slowdown in
global growth as exports represent
almost 50% of GDP. The Philippines
are especially exposed with over 40%
of exports coming from the electronics sector, whose business cycle is
closely linked to that of the advanced
Inflation, which was 3.1% in 2012, is
likely to remain under control in 2013.
The consumer price index benefited
from a drop in world agricultural
prices during the first half. In this
context of weak inflationary pressure,
and in order to curb the appreciation
of the Peso, the Central Bank cut rates
several times during 2012 so that rates
are now at historic lows.
The fiscal deficit in 2012 was just
2.3% of GDP and should remain moder-
ate in 2013. Against this backdrop
of a small deficit and sustained GDP
growth, sovereign risk has fallen and
public debt is expected to continue
downwards this year.
◗;Slowdown of activity ( 2.5% in 2013)
in a context of low external demand
◗;Tense social situation (strikes, current wage negotiations in mines
and automotive sectors).
◗;Increasing costs and rising wages.
◗;Lower latitude for fiscal policies.
◗;Currency depreciation (lowest level
in 4 years).
There was a sharp slowdown in the
South African economy in 2012. Any recovery, even slight, is likely to be some
way away. The mining and extraction
sector (diamonds and manganese),
as well as services, expanded at the
beginning of the year, while manufacturing output shrank significantly
(-8% on a quarterly basis). This trend is
likely to continue, given the outlook
for European economies, the main
outlet for South African exports (22%
of total). Domestic consumption, the
main driving force for growth (66% of
GDP), will be held in check by household debt (76% of disposable income),
inflation and deterioration in the job
market (25% unemployment).
The high costs of food and energy
are keeping inflationary pressures
up, worsened by the depreciation of
the Rand. This weakness in demand
should, however, make it possible
to hold inflation within the Central
Bank’s “target” zone (3% to 6%).
In 2012, the negative impact of the
economic slowdown on tax revenues
played its part in deepening the budget deficit. The consolidation of public
finances planned for the 2013/14 fiscal
year may be hard to achieve.
An increase in taxes will limit the
impact of the weak growth on rev-
enues, but is not likely to be enough
to prevent a further worsening of the
deficit. While public debt remains
under control, the pace of increase,
partly connected with the debt levels
of public companies, is cause for
The South African currency reached
at the beginning of 2013 its lowest
level in four years. Despite the rapid
rise in the level of external debt (36%
of GDP in 2012 against 28% in 2011),
the country’s ability to meet its scheduled payments is not, so far, being
Yves Zlotowski is chief economist at
Coface, a global provider of credit
insurance and related services.