MANILA, Philippines - The Philippines emerged as the most resilient to external shocks among 21 emerging markets ranked by a US-based think-tank.
In a note titled “Emerging Market Macroeconomic Resilience to External Shocks”, the Center for Global Development (CGD) said the Philippines vastly improved its rating in the research group’s resilience indicator, reflecting its ability to continue to withstand financial pressures without affecting its stability.
The Philippines jumped six notches higher from seventh place to top the CDG’s 2014 resilience index, a measure that gauges how indebted an emerging market is, how reliant it is on foreign funding and how it is likely to fare in the event of a global economic slowdown.
In the case of the Philippines, a notable factor for the big jump in its rating was its declining external debt to GDP ratio following the Asian currency crisis.
Data from the Bangko Sentral ng Pilipinas showed that the country’s external debt-to-GDP significantly decreased from 44.5 percent in 2007 to 27.3 percent by the end of 2014.
South Korea ranked second followed by China, Chile and Thailand.
“Most of the highest rankings were concentrated in Emerging Asia (with) the Philippines and Korea the strongest countries,” Rojas-Suarez said.
The relevant factors taken into account are current account balance, ratio of external debt to GDP, ratio of short-term external debt to reserves, fiscal balance to GDP, government debt to GDP, inflation versus targeted inflation and financial fragility.
CDG compared the data of 21 countries from 2007, the pre-global financial crisis year, to 2014.
The 16 other countries sampled were Argentina, Brazil, Colombia, Mexico, Peru, India, INdonesia, Malaysia, Bulgaria, Czech Republic, Estonia, Hungary, Latvia, LIthuania, Poland and Romania.
Liliana Rojas-Suarez, a researcher at CGD, noted that the policy decision taken in the pre-crisis period played a major role in explaining a country’s performance in terms of financial stability and economic growth.
According to the CDG, the country’s economic and financial resilience to external shocks can be measured by its capacity to navigate external headwinds and its capacity to rapidly implement policies to counteract the effects of the shock on economic and financial stability.
“On an overall basis, countries in Emerging Asia are currently best positioned regarding financing needs than other emerging market economies. However, current account surpluses have declined in all of them, with India and Indonesia displaying deficits,” Rojas-Suarez said.
“In spite of the sharp improvement in the Philippines, which now occupies the first position in the ranking19, and the sustained strength of South Korea, the macroeconomic performance of Emerging Asia as a region is relatively not as resilient to external shocks as it used to be. India’s position has deteriorated significantly and Malaysia has joined the group of relatively less resilient countries; the former due to recent excessive indebtedness both external (private sector) and domestic (public sector),” she noted.