Typhoon Haiyan, one of the strongest typhoons in history, devastated the Visayas region of the central Philippines on November 8. On behalf of the Trimark Global Fund team, we send our condolences and well-wishes to the people affected by this tragedy as they rebuild their communities.
A few days after the disaster, and barrage of headlines, I was asked how I thought this may impact the Asian economy overall.
What came to mind first was a business trip I took to the Philippines earlier this year. I was well-versed in how North American companies relied on the Philippines to provide business outsourcing services because of low labour costs and a workforce that is fluent in American English. But, what surprised me was seeing first-hand just how connected the Philippines is with Canada.
For example, when I passed by a large TELUS building in the middle of a business park, I didn’t feel 11,000 kilometers from home. I felt equally at home while on a management tour of a Philippine Costco-type warehouse store, which was virtually indistinguishable from a Canadian Costco store. The familiar Kirkland brand filled the shelves – the most noticeable difference was the impressive wall of 20+ varieties of SPAM, something I’ve never seen in Canada!
Which brings me back to my thoughts on how Typhoon Haiyan may impact the Asia economy overall.
The Philippines is the world’s largest producer of coconut oil. The region hit by Haiyan produces over one quarter of the country’s coconut oil along with 60% of its sugar and 20% of its rice. While only a fraction of production will be lost because of timing of harvest, this temporary disruption will likely bring some inflationary pressure.
The Visayas region accounts for 12.5% of GDP and the initial estimates of the disaster show a 0.5% – 1% detraction to GDP, so a fair estimate would be 7%+ GDP growth for the country in 2014. The rebuilding effort will give the Philippines GDP a boost, and the typhoon will not undo the hard work that the Philippine people and their government have put into improving the country over the last several years.
Overall, the Philippines has a healthy balance sheet, favourable demographics (its labour force is expected to grow by 40% in the next 20 years), rising income and strong remittance from overseas Filipino workers (representing about 10% of GDP).
The Philippine recovery effort will not likely have a meaningful impact on the overall Asian economy, due to its small size relative to other countries in the region.
The Canadian government will match each eligible dollar to registered Canadian charities that are receiving donations for the Typhoon Haiyan relief effort. Learn about the donation criteria and program here.
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Note: The companies mentioned in the article were selected for illustrative purposes only and are not intended to convey specific investment advice.
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