The Philippines’ Hemmed Hurricane Resistance

Philippines debt and equity maintained double-digit gains as another massive December typhoon lashed the islands, with resident evacuations and property defense carried out pre-emptively with advance warnings. The sovereign investment-grade rating was lifted a notch despite GDP growth leveling to 6 percent on reduced government spending after a unilateral President Aquino scheme was dismissed by the courts. It will be superseded in 2015 by the long-planned public-private partnership regime designed for infrastructure, as lower oil prices also limit inflation to the 2 percent target and aid domestic consumption.  However worker remittances from the Gulf could suffer as the peso has buckled below 45/dollar. The central bank has held interest rates but bank deposits have shifted to foreign currency as political drama unfolds over a possible presidential second term bid despite sagging popularity ratings. Business executives have applauded his anti-corruption problem-solving stance but note a lack of common touch in part due to the historic pattern of family dynasties at the helm. An open succession campaign would have front-runners from the main parties but could see independent candidates intent on appealing to an untapped youth vote, according to observers. This base was instrumental in Indonesia’s nod to President Jokowi, who immediately alienated it with a 30-percent fuel subsidy increase saving half a percent in output as he followed through on campaign hints. Angry demonstrations ensued but better food distribution may slash staple costs to offset the blow. The foreign direct investment agency has been recast as a one-stop shop and longer term strategy call for return to net energy exports with hydrocarbon law and royalty overhaul. Growth will again be just 5 percent next year and the rupiah has tumbled toward the 13000/dollar mark as monetary policy has tightened. Officials are closely monitoring global climate negotiations in Peru as China, a major coal customer, has already pledged a 25 percent carbon emission cut over the next decade. The current account gap is projected indefinitely at 2.5 percent of GDP and foreign bond funds have recently turned cautious with state banks and pension funds exerting more influence.

Malaysia in contrast has experienced across-the-board asset selloff as the region’s sole oil exporter with the ringitt at a post-crisis low as the central bank slams undue “speculation.” Public debt/GDP may crack the 55 percent statutory limit with the relentless price decline although prior subsidy removal may cushion the budget drag. Value added tax will go into effect the next quarter and fixed investment may soften despite projects in course under the Prime Minister’s Economic Transformation Program. Petronas shares have dragged the MSCI Index to an over 10 percent loss as the government hydrocarbon giant tries to diversify overseas, most recently with an Argentina shale deposit deal. The airlines investigation continued in Ukraine as experts got access to the presumed missile site and authorities may have to contend with additional liability claims as the family storm continues over a missing predecessor.