Philippines worst hit in ASEAN by surging yen
Philippines worst hit in ASEAN by surging yen
KUALA LUMPUR (AFP): The emerging economies of the Association
of Southeast Asian Nations (ASEAN) have been bashed by the
runaway yen to varying degrees, with the Philippines most badly
hit, a leading broking house said yesterday.
The impact of the rising yen was most damaging to the
Philippines in terms of ballooning foreign debt obligations,
followed by Indonesia, Thailand and Malaysia in that order, top
local brokerage Rashid Hussain Bhd. (RHB) said in an analysis.
"The peso has plummeted by 26 percent against the yen (since
the beginning of the year). The ringgit, baht and rupiah have all
fallen by as much as 15 percent to 17 percent," said the
brokerage.
Malaysia, which has the smallest fraction in yen-denominated
loans, was the only country where the appreciation in its foreign
reserves of US$1.7 billion had actually outweighed the $1.6-
billion increase in its foreign debt load, said RHB.
The RHB analysis did not include ASEAN member Singapore
because of the safe haven status of its currency and also
excluded Brunei.
The Philippines and Indonesia would be hardest hit due to
their large foreign debt obligations -- mainly denominated in yen
-- contrasted with small foreign exchange reserves, said RHB.
The Philippines debt burden was estimated to have grown by
$2.8 billion, or 17.2 percent, since January compared to an
increase in foreign reserves of only $500 million.
Indonesia
Indonesia's foreign debt had ballooned by $7.8 billion, or
seven percent, while its foreign reserves had only grown by $1.1
billion.
The report said Thailand was less badly hit, with an increase
in foreign debt of $4.3 billion and its foreign reserves higher
by 2.8 percent.
The surging yen had also eroded ASEAN export earnings to Japan
while bumping up Japanese import prices.
"The impact on imports and the trade balance will be most
severe for the Philippines and Thailand. Both countries import a
large fraction from Japan (above 20 percent) and run a large
bilateral trade deficit with Japan," said RHB.
RHB economists said the trade deficit was likely to worsen
further because of the low price elasticities of most of the
imports, mainly made up of components and specialized goods.
The only respite the Philippines was likely to see was in
terms of export earnings, said the report.
While Indonesia and Malaysia's exports to Japan were made up
mainly of price-inelastic commodities denominated in dollars,
Philippine exports to Japan were less commodity-based and more
sensitive to price changes.
In the long-run, RHB analysts said the currency turmoil was
likely to push more Japanese corporations to step up investment
in ASEAN countries.