Philippines is Southeast Asia's Best Performing Economy Despite Disasters

The Philippines is poised to keep its position as the best performing economy in Southeast Asia despite the impact of natural calamities, but challenges remain in terms of creating jobs-intensive growth that translates into poverty reduction.

Socioeconomic Planning Secretary Arsenio Balisacan said the economy is projected to accelerate to 6 to 7 percent this year from 6.8 percent in 2012 amid the devastation brought about by the earthquake and powerful typhoon “Yolanda” in Visayas.

Balisacan said the gross domestic product (GDP), a measure of economic performance, is expected to slow down to 4.1 to 5.9 percent in the fourth quarter, taking into account the damage from these natural disasters.

GDP in the first three quarters already reached 7.4 percent, still above the 6 to 7-percent target that the interagency Development Budget Coordination Committee (DBCC) has set for the year.

“With the economy growing for the full year to come close to 7 percent, it is still one of the best performing economies that you could find in the Asian region,” he said.

The Philippine economy remained resilient on the back of sound macroeconomic fundamentals.

With this, the country increased its competitiveness rankings and received major investment grade ratings from credit-rating agencies Moody’s Investor Service, Standard & Poor’s and Fitch Ratings.

“However, our experience of rapid growth is still short. The challenge is to sustain it and improve the country’s capacity to generate remunerative jobs,” said Balisacan, also the National Economic and Development Authority (NEDA) chief.

Reducing poverty

NEDA Asst. Director General Rosemarie Edillon estimated that the Philippines needs to sustain a growth of six percent over the next 10 years to double its income imperative to halving the poverty incidence.

Poverty incidence in the country eased slightly to 19.7 percent in 2012 from 20.5 percent in 2009 despite robust economic growth.

The 7 percent GDP rate in July to September was the fifth consecutive quarter that growth was at least 7 percent, buoyed mainly by the expansion in consumer spending and higher business and consumer confidence.

The government is keen on “rebalancing” the economy to generate more job opportunities to reduce poverty.

This involves moving out the economy of too much dependency on personal consumption expenditures to other sources of growth, like investments particularly infrastructure development, and trade.

“We need to rebalance because of the concern for employment. Consumption-led growth driven mainly by our remittances would not create more quality jobs,” Balisacan noted.

He identified sectors that can provide quality jobs particularly manufacturing, tourism, agri business and logistics infrastructure.

“Those are the sectors that are very promising for us. If we can generate or expand these sectors, we can create more remunerative jobs than that we have now,” he noted.

The government is increasing infrastructure spending to over 5 percent of GDP by 2016 due to the reconstruction in areas affected by typhoon Yolanda and the earthquake that hit Eastern Visayas.

“Our focus is still infrastructure because infrastructure development will have a big bearing on the macroeconomic competitiveness,” said Edillon.

The Philippines is boosting the agriculture sector, which employs a third of the total employed persons but with a measly 12-percent contribution in the country’s GDP.

“This means labor productivity growth in agriculture is low. Underemployment is high because (work is) seasonal in agriculture. So our strategy is to improve productivity in agriculture by linking the small farmers with the supply chain, particularly to manufacturing,” Balisacan further said.

Miguel Varela, president of the Philippine Chamber of Commerce and Industry (PCCI), suggested that if the government cannot call a constitutional convention, Congress can consider laws affecting foreign investments.

“These need to be liberalized so we can attract more investors. It is still investors that will help us to speed up developments and to sustain our growth,” he said.

Philippine Economy 2014 Outlook

Balisacan was optimistic that a strong growth of 6.5 to 7.5 percent would be sustained in 2014, with the reconstruction efforts contributing to growth.

Citing experiences of many countries, he said that recovery and reconstruction programs, once are in full blast, generate economic activities and create jobs.

The government has earmarked P34 billion for critical immediate actions on post-Yolanda recovery and reconstruction, which are now underway. Another P100 billion is forthcoming in 2014.

The P134 billion was part of the total P361 billion in investments needed for a four-year implementation of the Reconstruction Assistance on Yolanda (RAY) Plan. It shall cover shelter and resettlement, industry and services, education and health services, and infrastructure.

The implementation of the updated Philippine Development Plan (PDP) to be released in January is also imperative in order to sustain robust growth over the next three years.

The Plan contains strategies to achieve growth, including accelerating infrastructure development, creating new growth drivers and improving resilience to natural disasters. ( Leslie D. Venzon/PNA)FPV