The Philippines stands at a precarious economic juncture as rising US interest rates and elevated oil prices threaten to widen the gap with more resilient Asian economies benefiting from the artificial intelligence (AI) boom. ANZ Research warns that while many countries in Asia have shown resilience against these financial shocks, the Philippines is not among the beneficiaries.
Economic Vulnerabilities Amid Regional Strength
The currencies of these three economies are also the worst-performing ones year to date, as high oil prices raised the import bill while higher US interest rates made it more challenging to attract portfolio inflows to fund external deficits.
ANZ Research
ANZ points out that the Philippines, alongside India and Indonesia, is particularly vulnerable due to its current-account deficit and lesser gains from AI-related exports. The peso's recent performance has been disappointing, with projections indicating a deterioration against the dollar.
In contrast, nations like China and South Korea have recorded significant export gains fueled by demand for AI-related technology and products. China's exports surged by 25 percent year-on-year in July, while South Korea's soared by 68.7 percent.
This disparity is significant, as economies benefiting from AI investments have been better positioned to absorb the pressures of rising oil prices and US Treasury yields. The Philippines, however, relies heavily on domestic demand, with net exports contributing only 0.4 percentage points to growth.
As global hyperscaler capital expenditure is projected to reach nearly $1 trillion by 2026, the Philippines' limited involvement in this growth cycle could amplify its economic vulnerability. ANZ warns that any slowdown in AI-related investment could further impact the nation’s economic outlook.