Philippines called 'brightest' in Southeast Asia

MANILA, Philippines - A report by the Institute of Chartered Accountants in England and Wales (ICAEW) said the Philippines is significantly contributing to the "glowing" Southeast Asian region with its bright economic prospects.

"The Philippines is the brightest spark in glowing Asean region," the report said, citing the recent quarterly review Economic Insight: South East Asia by its partner organization Cebr that highlights Indonesia, Malaysia, the Philippines, Singapore and Thailand.

ICAEW said that the "very positive" outlook for the country which is expected to grow 5.1 percent in GDP this year and in 2014 can be attributed to strong exports, "booming" household expenditures and the government's heavy infrastructure investments.

"The country looks set to shake off its former reputation as the ‘sick man of Asia’," Cebr's macroeconomics head Charles Davis said in a statement.

Davis said, however, that the country's capacity constraints will likely lead to a slowdown in growth, which is seen to fall to 4.5 percent in 2015. Such constraints cause higher inflation and tighter monetary policy.

Furthermore, the growth in stock prices in the Philippines--currently at 34 percent--is seen unsustainable and suggests a bubble to emerge, Davis warned.

“Stagnation in industrialized nations means investors are turning to emerging economies in search of higher yield,” Davis, also an economic advisor at ICAEW, said.

ICAEW South East Asia director Mark Billington, meanwhile, added that the Philippines' emergence in the region can be maintained through the management of its currently increasing credit levels taken on by firms and households.

"Debt levels in the region remain manageable for as long as the projected positive growth story remains. This is fine for now but would be a cause of concern if credit growth continues to outpace nominal GDP growth at the same rates we see today," Billington said.

Still, such scenarios are not as bleak compared to the country's larger prospects including its strong market investment matched with the higher credit levels, the report said.

“Growth outlook for both Philippines and ASEAN as a whole remains healthy. However careful judgment will be needed to ensure that credit growth and capital inflows are used to lay the foundation for future prosperity and not fuel a bubble,” Billington said.

The quarterly report provides the organization's 140,000 members with an overview of the region's economic performance.