Philippines's poor export growth in September unlikely to matter much for now

Philippines's September export growth came in at -24.7% (YoY), well below expectations. It is important to watch data in the upcoming months even if this may prove to be just a one-off. Nonetheless, after falling some 11% in 3Q15, full-year export growth may now be closer to -5% instead of the -2%. Clearly, the government's official target of 5% growth this year is beyond reach. 

This data alone does not affect the assessment of the economy by much. We have seen two consecutive years of robust export growth and the moderation this year is partly due to the high basis effects. More importantly, overall GDP growth has been driven mostly by consumption and investment growth anyway. GDP growth circa 6% is still in the offing for next year. 

From the flows perspective, as long as remittances continue to come in around USD 2bn per month, external financing risks remain manageable even if the goods trade balance slip into the negative. The current account balance is still likely to be in a surplus of about 3% of GDP in 2016. 

Watch for cues from Bangko Sentral ng Pilipinas (BSP). Given risks of a slowdown in China and a lacklustre G3, the BSP prefers to have a softer currency. Note how the peso has been underperforming its regional counterparts in the past three months and it is currently trading at a multi-year low against the US dollar. Do not rule out further upside in the USD/PHP.