The Philippine economy, as other emerging market economies, benefited from an expansionary global financial cycle in the wake of the global financial crisis. Capital inflows to the Philippines surged following the Federal Reserve’s quantitative easing and ultra-low interest rate policy, with low global volatility also contributing to the surge. These developments led to compressed domestic yields, asset price inflation, and rapid credit growth. At the same time, economic growth accelerated and corporate leverage increased. However, the global financial cycle has turned since mid2013 with the taper tantrum talks, and is expected to tighten further as the
Federal Reserve starts normalizing its monetary policy.