The Philippine government needs to adopt and implement the foundations of a strong economy to grow and sustain its gross domestic product (GDP) over the coming years, the central bank said on Wednesday.
In his speech at the Philippine Economic Briefing 2015, Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr. said that the country must go for a sustainable growth based on the foundations of governance, human capacity and infrastructure.
“These three things – governance, human capacity and infrastructure – are all foundational. If we want to shape a good future, we need a good foundation,” Tetangco noted.
In the past five years, the Philippine economy performed quite well, growing by 6.2 percent on average. The growth was traced to consumer spending that boosts corporate results, and the remittances by overseas Filipino workers remittances and the business process outsourcing (BPO) sector.
“Over the past five years, we had already made significant advances in governance reform. In recent months, we’ve begun to scale up on infrastructure. And now, we are entering the ‘demographic window’,” the BSP chief said.
The Aquino administration has shifting the business climate by opening the economy to more foreign investors and further strengthening efforts to fight graft and corruption within the government. As a result, the Philippines garnered an investment grade credit rating and a higher place in terms of competitiveness.
Foreign investors also took note and participated in the capital markets, infrastructure projects and other industries.
The government is ramping up infrastructure spending by up to 5 percent of GDP by 2016, which compares with 3 percent in 2014.
Tetangco noted that the country should now focus on the human capacity or human capital development by taking advantage of the “demographic window.”
The demographic window is the period where the country may enjoy the highest number of workers that will contribute to productivity and economic growth.
With a young and educated labor force, Tetangco noted that the country entered the demographic window this year—an economic phenomenon that will last until 2050.
At the same briefing, Socioeconomic Planning Secretary Arsenio Balisacan said the development of human capital consisted of matching education to the skill sets needed enhance productivity and professional expertise.
“We need to maintain high levels of public investments in human capital particularly health and education,” Balisacan said, noting that this could allow 7 percent growth year on year.
Investing more in the education sector, particularly higher education, would help in taking advantage of the demographic window as the demand for innovation and research and development grows, he said.
Education Secretary Bro. Armin Luistro, meanwhile, said a shift in how the youth would be educated had to be implemented to better prepare them to meet the ever-changing demands of industries.
“Today the needs of industry 10 years from now cannot be defined,” he said.
Tetangco said good governance, human capital and infrastructure would enable the economy to withstand the challenges it was facing, including a weakened global economy, volatility in capital and financial markets, and the intensified El Niño that could extend up to mid-2016.
“A pragmatic response is to ‘go back to basics’. Whatever happens externally, we must go back to building the blocks of a strong economy,” he said.
“In order, however, to move us forward and on to a higher economic trajectory, we need to now take even more specific steps to further institutionalize governance, raise human capacity, and build public infrastructure.”