Economy & Trade

The merry mix of economic indicators in December

Dec 11 2018 - So far, December has been a month of mixed messages in terms of economic indicators here in the Philippines. While the seemingly contradictory data might be taken as a sign of a weakening economy, we believe that a closer look shows there are positive portents for the beginning of the new year.

On the negative side, there is a somewhat wider trade deficit for the month of October (with official data due out today, Tuesday), a peso that has weakened slightly after earlier gaining strength, signs of slower credit growth, and less business and consumer optimism for this quarter and next.

On the positive side, gross international reserves (GIR) for November marked a three-month high. Central bank data released on Friday showed that gross reserves rose to $75.486 billion in November, representing a 1.03-percent increase from October and the biggest since August, when the GIR stood at $77.933 billion.

Although the reserves figure for November was only slightly higher than the preceding month, what the central bank mentioned as partially tempering the rise were payments made by the national government for its foreign exchange obligations, which should also be viewed positively for the economy from a longer-term perspective.

The economy also showed other favorable factors, such as the savings rates among Filipino households being higher, and of course, inflation seems to have turned a corner, easing slightly to 6 percent in November from a nine-year high of 6.7 percent the previous two months.

All of this is happening against a backdrop of a global economy that seems increasingly unstable. Given the fact the Philippines is so reliant on external resources — such as remittances and BPO revenues — concerns that external turmoil will affect us here are not completely unjustified.

Things are not quite what they seem, however. As a recent report by HSBC explained, the higher trade deficit can be attributed to capital imports needed for infrastructure development; this will have a significant multiplier effect.

Slowing credit growth, in the context of concerns about debt bubbles, reflects the conservative approach of the country’s stable banking system. Add to these factors the near-certainty of higher remittances in this holiday month, not to mention the recent declines in oil prices, prospects for at least the first part of 2019 are looking bright.

The lesson in all of this is that the most accurate picture of the economy is the biggest one, and taking precipitous action on the face value of a few indicators is unwise.

In other words, don’t panic. The world may not be in the best shape, but we are well-equipped to weather any coming storms.

This story was originally published by The Manila Times, Philippines

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