Boosting investment growth in the Philippines will be one of the key challenges to the successor of the Aquino Administration, Singapore-based bank DBS said.
“Whoever wins the presidential election in May will have plenty to prove,” DBS said in a research note.
The bank said what the next government will do to step up investment growth should be watched closely.
The bank noted that fiscal revenue collection has been strong, at an average annual growth of 12 percent during President Benigno Aquino 3rd’s term.
“It is the main reason that allowed Aquino’s administration to kick off the infrastructure overhaul through its public-private partnership program,” it said.
DBS noted that total investment growth contributed about a third of the economic growth during Aquino’s term.
With that suggestion that the next government will be starting from a sound position, it stressed that investment is the key that could sustain robust consumption growth and potentially bring overall Philippine gross domestic (GDP) growth to 7 percent to 8 percent trend.
DBS also suggested that addressing the long-debated constitutional limits on foreign ownership could play a role in increasing investment.
“It is important to watch if the next government supports the easing of foreign ownership limits,” it added.
FDI dwarfed by remittances
DBS pointed out that total foreign direct investment (FDI) which is projected at $6 billion last year, practically unchanged from $6.2 billion in 2014.
For the January to November 2015 period, FDI inflows hit $5.452 billion, down 3.4 percent from $5.646 billion a year ago.
This indicates that total FDI continues to be dwarfed by the growth of foreign worker remittances, which has been sustained every year in the past decade, the bank said.
“Strong remittance flows are definitely a positive for the macro risk profile. At the same time, however, it triggers questions about the dynamism of the local economy, especially since foreign worker remittances make up almost 10 percent of the economy,” the bank said.
Last year, personal remittances from Filipino overseas rose to a record high of $28.483 billion, breaking the previous high of $27.273 billion posted in 2014.