While everybody and his uncle's dog continue to worry about the 'fiscal cliff' and persistent economic malady in Europe, one Asian country is going its own merry way. No, it's not China - although economic indicators have been improving there too.

That Asian country is the Philippines - the land of my birth. Yes, I'm half Chinese, half Filipino and now a 100% Australian. Lucky 'ey? The way these three economies are going, I'm getting the best of three worlds.

Australia's the envy of the OECD. China only recently became the second largest economy in the world (soon the first?) and now recent growth stats showed the Philippines the best performing economy in Southeast Asia. How good is that? I can be proud no matter what nationality I choose.

Philippine GDP jumped by a better than expected 7.1% in the year to the third quarter - better than Indonesia's 6.2%, Malaysia's 5.2%, Vietnam's 4.7% and Thailand's 3.0%. More, according to the 'Philippine Daily Inquirer', "The country is the only economy in the world which the International Monetary Fund (IMF) believes will grow faster than earlier expected this year."

This is evident in the outperformance of the Philippine stock market this year. Year-to-date, Philippine SE index has so far gained 29.0%. That's despite all the worries that's plagued markets and economies throughout the year - a fact underscored by the smaller 8.3% increase in the MSCI Emerging Markets Index over the same period and the 10.2% rise in the MSCI World Index.

President Benigno Aquino III's policies - increased government spending, war against corruption and general good governance - appear to be working and have been given a thumbs up by both Moody's and Standard & Poor's which recently upgraded the country's credit rating to one notch below investment grade.

That'll mean even lower interest rates for Manila's borrowings - not that it needs that much anyway. The Philippines' debt-to-GDP ratio has steadily come down from 71.4% in 2004 to 40.5% last year.

A lower interest rate burden would go a long way into containing the country's budget deficit - down from 3.7% of GDP in 2010 to 2.0% last year - which would come under upward pressure as Aquino implements his plan to increased spending on roads and airports by US$17 billion.

Manila has come a long way from being the "Sick Man of Asia" for most of my life to the "Diamond in the Region" (borrowed not stolen from Enrico Tanuwidjaja, economist for Southeast Asia at RBS in Singapore).

However, I'm seriously concerned that all these goodness will be undone once Aquino finishes his term in 2016 just like what happened when former President Fidel Ramos - credited with reviving the economy and restoring investor confidence in the country during his term -- stepped down in 1998.

It wasn't fun in the Philippines in those 12 years that followed.

This article was first published in www.financialstandard.com.au where Benjamin Ong is the Director of Economics and Investments Research.

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