Electronics sector continue to offer support in Philippines

Philippines's export growth has remained in the negative, at -1.1% (YoY) in November 2015. More importantly, however, exports of electronics have chalked up a strong 9.3% gain. The export growth of electronic products is currently trending at circa 8% annual pace, pretty strong when compared to the performance elsewhere in the region. Considering that global growth was also somewhat disappointing in 2015, the sustained growth in electronic exports is also an encouraging sign for the medium-term.

The Philippines economy is still driven mostly by domestic demand. The outlook of consumption and investment growth is far more important for the GDP growth outlook. And from the external flows perspective, as far as remittance flows remain robust, exports data may not matter as much. It is hardly surprising then that the peso has been relatively stable this year, despite regional growth concerns stemming from China risks. 

Not that exports data should be completely ignored going forward. Bangko Sentral ng Pilipinas (BSP) turned more tolerant of a softer currency in 2H15, just as export growth turned deeper in the negative. The outlook of export growth may have an impact on the central bank's policy stance. 

"We expect export growth to rebound to about 7% in 2016, pretty decent given the projected 6% fall last year. Accordingly, we reckon that there is a good chance that BSP may raise its key policy rate by 25bps in 2H16", notes DBS Group Research.