The Philippines ranks among the weakest across the Asia-Pacific region in the important metric of transparency, which measures whether governments and their officials are forthright and accountable, according to Moody’s Analytics.
In its latest iteration, the data analysis unit of the sovereign credit watcher Moody’s Investors Service reported the country’s corruption index at 34/100 in 2023, well below the global average of 43/100. The Moody’s unit uses the scale used by Transparency International (TI) which directly measures the countries’ corruption index rather than rely on the opinion or view of experts.
According to the Moody’s unit, the country’s performance in the transparency and accountability department proved to be “some of the weakest” in the region alongside that of Indonesia whose economy is three times larger at USD1.32 trillion.
At this level, the USD404-billion Philippine economy improved by a notch and ranked on equal footing with Indonesia and with Ecuador, Malawi, Sri Lanka and Turkey as well. The top five best-performing countries include Denmark, Finland, New Zealand, Norway and Singapore.
The bottom dweller in the transparency rankings is Somalia with a score of only 11/100.
But as the 115th least corrupt country in the world of the 180 measured, the Philippines, the Moody’s unit said, should fare better this year than last.
“The Philippines had a good finish to 2023, with GDP expanding 5.6 percent year on year in the final quarter. We and the market had expected milder growth of 4.9 percent and 5.2 percent, respectively. That said, a matching 5.6 percent growth rate for the full year meant the economy missed the government’s 6 percent to 7 percent growth target,” Moody’s Analytics said.
Its analysts noted that households and private investments bore the brunt of the heavy lifting in the final quarter and that waning inflation a tight labor market and a healthy flow of remittances gave consumers the confidence to spend.
The analysts noted the large jump in the hotels and restaurants category and in transport. A similar leap in investment, led by the construction and durable equipment industries, surprised its analysts given the high borrowing cost of funds in the country.
“Government spending proved to be a wildcard. Staying true to its volatile nature, spending declined on a year-earlier basis after making a spectacular jump in the third quarter. Trade was another weak spot. Goods exports tumbled by 11.6 percent year on year, with the largest decline coming from semiconductors. Rocketing service exports – buoyed by the travel industry – could not save the day,” Moody’s unit analysts said.
They also noted the slow pace of growth in 4Q on the production side where the construction sector proved to be a bright spot dampened by the poor performance of the manufacturing sector.
Services accounted for 61 percent of GDP in the fourth quarter last year after picking up 7.4 percent, with gains spread across the accommodation and food service segments and by the transport and storage.
“The economy will fare better this year, especially in the second half. Fading inflation will give the Bangko Sentral ng Pilipinas confidence to lower borrowing costs. Volatile inflation prints in the first half of the year will persuade the BSP to stay on hold, leaving us to expect its first rate cut to be in June at the earliest. Until then, household budgets will be under pressure.
“As borrowing costs ease, private consumption and investment should benefit. An improving external climate will bolster trade, and an expected upturn in demand for semiconductors and electronics will brighten prospects in the second half,” Moody’s Analytics said.
