Philippines slips to 8th spot in macro risk ranking

MANILA, Philippines — The Philippines fell to eighth place in macro risk assessment ranking last year, from second spot in 2020, as the cover for foreign obligations and fiscal position declined due to the pandemic, according to DBS Bank Ltd. of Singapore.

In its latest emerging markets risk heatmap, DBS said the Philippines and Thailand have downshifted from strong external positions.

“The pandemic has been harsh on the Philippines, as it slipped from number two in 2020 to number eight in 2021,” DBS said in the report.

This is the lowest ranking of the Philippines in six years. It ranked fourth in 2016, first in 2017, sixth in 2018, fourth in 2019 and second in 2020.

As a percent of gross domestic product (GDP), the foreign exchange buffer of the Philippines stood at 24.6 percent, 27.5 percent in terms of external debt, 59.1 percent in terms of government debt and 51.5 percent in terms of private debt.

The country’s budget deficit swelled to 7.6 percent of GDP last year as the government borrowed more to plug the shortfall caused by lower than expected revenues and higher expenditures to fund COVID response measures.

Likewise, the Philippines received a real exchange rate (REER) score of 5.1 percent.

DBS said risks associated with countries’ REER of 30 percent above trend include economic overheating, excess and unhedged borrowing, and excess capital inflows.

On the other hand, risks to countries facing 30 percent undervaluation include high imported inflation, loss of purchasing power, and external debt service difficulties.

The key indicators of analysis used by DBS include foreign exchange reserves, fiscal balance, private and public sector debt, external debt, savings-investment balance, gross external funding requirement, and real exchange rate.

“In general, vulnerability indicators have worsened in emerging markets in recent years, as both the cover for foreign obligations and fiscal position have slipped in many countries. Compared to some large emerging market economies, Asian countries look fairly healthy,” DBS said.

DBS noted Taiwan and South Korea have some of the best score in the emerging market space, while China, India, Malaysia and Indonesia fell in the middle of the pack.

“While there are other economies with worse fundamentals, a year of higher rates and likely volatility in capital markets will keep the policy makers of these four economies on their toes,” DBS added.

Year after year since 2016, DBS said Argentina has some of worst vulnerability scores, while Chile has slipped sharply from a comfortable mid-tier ranking just five years ago amid a dramatic worsening of its fiscal and external debt metrics.

Saudi Arabia took the top spot last year, followed by Taiwan and Russia, while Chile and Columbia shared the 24th spot.