MANILA, Philippines - The country’s growth prospects remain robust despite current volatilities but a local bank stressed that the Philippines should take this chance to craft policies that will create more jobs and alleviate poverty.
“Nothwithstanding the current market volatilities and the slowdown in some emerging economies, the Philippines is riding high on rosy and positive economic outlook,” Pauline Revillas, research analyst at Metropolitan Bank and Trust Company (Metrobank), said in the bank’s latest Weekly Views.
Revillas noted that the World Bank (WB) recently raised its full-year forecast for the Philippines but downgraded expectations for its regional peers.
“WB noted that the country is expected to maintain its growth momentum into the near to medium term, mainly spurred by strong consumption spending, vibrant services sector, and higher infrastructure spending,” Revillas said.
At the same time, the Philippines was awarded another investment grade rating earlier this month, this time from Moody’s Investors Service. The action followed Fitch Ratings’ in March and Standard and Poor’s in May.
Revillas, however, said the high economic growth numbers should be able to translate to the creation of more jobs and the alleviation of poverty.
“The current economic growth however is for naught if it is not sustainable and inclusive. The country is continually burdened by high unemployment and poverty rates despite the strong GDP (gross domestic product) growth,” Revillas said.
The country’s unemployment rate worsened at 7.3 percent in July from 7 percent in the same month last year, latest data from the National Statistics Office showed.
The poverty incidence in the Philippines, meanwhile, stood at 27.9 percent in the first half of 2012, barely unchanged from the same period in 2006 and 2009.
These developments were amid a faster-than-expected 6.8 percent economic growth seen by the country in 2012, above government’s expectations of 5 to 6 percent.
For this year, the economy has already expanded by a stellar 7.6 percent in the first half, also faster than government’s target of a 6 to 7 percent growth.
“It is indeed imperative that policies be made and implemented for the benefits of growth to benefit the broader population,” Revillas said.
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Here comes some good news.
A new global report claims Filipinos and foreigners would make a wise decision to invest in the Philippines now, thanks to a fast improving business environment.
In fact, Philippines was tagged as the most improved among the 60 economies in Grant Thornton’s “Global Dynamism Index” released Monday, jumping 25 places to the 21st spot this year.
The Philippines even posted greater improvements compared to China, which jumped 17 places to being third globally, topped only by Australia and Chile.
The report, which ranks countries according to changes implemented to make it easier for businesses to grow, gave the Philippines an index score of 55.7 points.
The Philippines performed best in economics and growth where it got 80 points, owing primarily to high gross domestic product growth.
This comes after the Philippine economy's 7.5 percent growth from April to June, the fourth consecutive quarter with expansion above 7 percent under President Benigno "Noynoy" Aquino's III's watch.
“The fast-paced growth of the Philippine economy certainly underlined our substantial rise in this year’s GDI,” said Ma. Victoria Españo, chief executive of Grant Thornton member Punongbayan & Araullo.
The Philippines also posted high scores in terms of labor and human capital, 67.9 points, as well as business operating environment, 62.4 points.
“The boost was driven by labour productivity growth of 5.4 percent. Only in China (7.4 percent) did worker output rise faster in 2012,” the statement read.
But the Philippines registered its worst performance in financing environment, where it was given 49.1 points, and science and technology, 19.3 points.
Among ASEAN economies, the Philippines fell behind Singapore, ranked 7th globally, Malaysia (13th) and Thailand (19th). It however bested Vietnam, which bagged 27th in the global list, and Indonesia (37th).
“With the right mix of policies in place, our economy could offer even more opportunities for dynamic businesses,” Hernandez said, commenting on the report.
Robust economic growth in the Philippines should continue this year and next despite the anticipated unwinding of the massive US stimulus programme, the International Monetary Fund said Tuesday.
"In 2013, growth is expected to remain strong at 6 3/4 percent, easing to about 6.0 percent in 2014, which is still somewhat faster than potential output," IMF official Rachel van Elkan said in a statement.
Both figures would be below the 6.8 percent gross domestic product (GDP) expansion in 2012, and the 7.6 percent advance in the first half of 2013, the latter underpinned by robust consumption and investment amid subdued export markets.
With the healthy first-half data, the government now expects full-year growth to exceed its 6-7 percent target.
Van Elkan, who led an IMF mission that visited Manila last week, said the Philippines like other emerging markets saw its currency weaken after an announcement in late May of the prospective tapering of asset purchases by the US Federal Reserve.
"Nonetheless, when tapering does eventually begin, the Philippines' strong fundamentals... position the economy to adjust smoothly to the accompanying capital flow reversal and slowdown in regional growth."
Van Elkan said the recent fall in the peso would "raise inflation gradually" but the overall balance of payments should remain in small surplus, backed by overseas worker remittances and business process outsourcing receipts.
The fiscal deficit should come in within the 2.0 percent of GDP budget target this year as higher spending is offset by an increase in revenues, she added.
The country’s economic growth is expected to stay above 7 percent for the fourth consecutive quarter as the Philippines outperforms the rest of Asia amid weak economic conditions.
Separate analyst forecasts showed that the economy would grow past the top end of the government’s 6 to 7-percent target for the third quarter of the year. This was after the Philippine economy grew by 7.5 percent in the second quarter and 7.7 percent in the first, making it the fastest-growing market in Southeast Asia.
“Given the backdrop of decelerating inflation and increased government infrastructure spending, we remain optimistic that gross domestic product (GDP) growth in the second half will again exceed the 7-percent target of the government,” First Metro Investment Corp. (FMIC) said in a report this week.
“Continuing low interest environment and better exports prospects provide additional support to this view.”
Supporting the country’s growth was the steady increase in remittances from overseas Filipino workers (OFWs). Domestic consumption, which is supported largely by remittances from migrant workers, accounted for about 70 percent of GDP.
Mirroring FMIC’s sentiment, Britain-based financial giant HSBC said it was “highly possible” that growth in the third quarter would surpass 7 percent.
HSBC sees the Philippine economy growing by 7.1 percent in 2013. Next year, growth is expected to decelerate to 5.4 percent, although HSBC Asian Economic Research head Frederic Neumann said there was a “high upside” for the economy next year.
Neumann said while remittances currently provide the Philippines with enough dollar income to pay for the imported goods and services it needs, “it won’t be there forever.”
Neumann said that, as economic condition continues to improve, more Filipinos will choose to stay in the country instead of seeking jobs abroad. This will mean lower remittances “10 to 15 years from now.” As a result, the Philippines will have to find a new stable and robust source of dollar revenues, he added.
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