Reassessing our landscape

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FINEX Folio -- By Flor G. Tarriela


With 2018’s first quarter over, Ricky Cebrero, PNB Treasury Head gave an assessment of what may be in store and strengthened our insights on how the country will fare given developments in the international front to set the tone for any preparations we need to do for the coming months.

From the inside looking out, there is a semblance of synchronized upward trajectory of global economic activity. North America is showing sustainable economic growth. Discussions on where interest rates in the US are headed based on the strong data are now off the table. Instead, the pace and frequency of interest rate hikes are in markets’ collective focus.

Likewise, unlike a year ago, this situation is now coupled with an apparent increase in economic activity in the Euro Zone. This has been emphasized with the start of the withdrawal of the expansionary liquidity that they have adopted after the Global Financial Crisis since years back. In Asia, Japan, one of the biggest contributor to the world economy, also has a positive story to tell, revealing consistent growth in its manufacturing sector.

The Asian region has a lot to be happy about. Our region will benefit from the expected stronger growth in the US, Euro Zone and Japan and our economic correlation with China. But there may be headwinds to this story. Among others, one of the main risks are global inflationary pressures, which may push interest rates higher at a faster pace and negatively impact Asia, a region that has been a recipient of global liquidity and low interest rates for a long time. Another concern would be a decline in world trade, a possible consequence of trade protectionism, an emerging theme potentially initiated by the motto “America First”. Further, we have to watch the relationship between blow-hot blow-cold China and the US, and the geopolitical risk emanating between North Korea and Washington. These events will directly impact the Asian economies. The latest is the potential trade tariffs the US has threatened to impose on goods from China and the retaliatory tit-for-tat by China on US goods. Markets seem appeased with the pronouncements of both countries that they still prefer discussions regarding this issue.

The Philippines is in a sweet spot. The strong gross domestic product (GDP) output of the country is still expected to go near 7% in the future. GDP is getting the additional boost and traction from foreign direct investments and government spending, especially with projects under the “Build, Build, Build” program.

A substantial number of corporations from China may also bring in substantial investments to the Philippines, an offshoot of the visit of President Rodrigo R. Duterte to Beijing and improved relations between the two countries. With the positive outlook of investors for the country, foreign direct investments are expected to have a positive trajectory for the year.

More jobs are expected to be created, which could attract back to the country some of the skilled Filipino workers abroad. This will serve as a hedge versus a future possibility that demand for workers abroad slows down. Such a strategy will also ensure the build-up of resilience of our consumption driven economy.

Philippine National Bank hosted events for its customers held in Manila, Cebu and Davao, and we felt strong optimism from our clients in their own businesses. They remain focus on the strong macroeconomic fundamentals in the country, belief in the monetary managers in maintaining stability in financial markets and the government’s speed of execution.

There are still a lot of things to be done like improving ease of doing business in the country and getting rid of corruption, among others. But after reassessing the macro landscape combined with sentiments of people on the ground, we see great opportunities coming our way. Even the Asian Development Bank says the Philippines is entering “the golden age of economic growth”. A prelude for the alignment of the stars? How we prepare for the unkown will spell out the difference.


Flor G. Tarriela is Chairman of Philippine National Bank. She was the first Filipina Vice President of Citibank N.A. and was formerly Undersecretary of Finance when Jose T. Pardo was DOF Secretary. She is a natural farmer and an environmentalis