ADB urges developing markets to strengthen fiscal position
The Asian Development Bank (ADB) said developing economies such as the Philippines, facing rising bond yields and weakening currencies, should strengthen their creditworthiness and fiscal position to withstand higher borrowing costs.
At a press conference on Monday, Masato Kanda, president of the Manila-based lender, said the bank was concerned about the impact of rising borrowing costs on its developing members but was encouraged that emerging-market economies had built buffers against external shocks.
Beyond strengthening domestic economic fundamentals, Kanda, who is serving his second term, called for a multilateral response to external shocks, including greater regional connectivity and stronger ties with trading partners.
“In general, [what] many countries can do, as before, [is] they strengthen the foreign reserves as a buffer, and most importantly maintain the sound macroeconomic policies in monetary and fiscal,” he said. “This is probably the strongest protection against, for instance, the speculative attack to the country.”
The Philippines is already feeling pressure in its financial markets. Government securities, including Treasury bonds and bills, recorded a $20 million net outflow of foreign portfolio investments in July, reversing a $540-million inflow a month earlier, according to data from the Bangko Sentral ng Pilipinas. The shift came as the benchmark 10-year government bond yield remained above 7 percent during the month.
The peso, meanwhile, has breached the 62-per-dollar level, setting consecutive record lows as the US currency strengthened. A weaker peso can increase the local-currency cost of servicing foreign-currency debt held by the government and Philippine companies, adding to their repayment burden.
Kanda said the Philippine economy could regain momentum if the government executes its spending plans effectively. The ADB also plans to increase investment in the private sector to help support economic activity.
The economy grew 2.6 percent in the first half of the year, weighed down by a war-driven surge in inflation and the lingering effects of a confidence shock linked to a major corruption scandal. In July, the ADB cut its 2026 growth forecast for the Philippines to 3.8 percent from 4.4 percent.
