Improving business confidence and growing investment will fuel domestic production this year, but the Philippine government continues to face the key challenge of creating more quality jobs that will help reduce poverty and deliver inclusive growth, the Manila-based Asian Development Bank (ADB) said in a report.
In its annual economic publication—Asian Development Outlook 2014—released on Tuesday, the ADB said the Philippines’ strong economic growth is expected to continue this year, though slower than last year.
ADB forecast gross domestic product (GDP) may grow above average at 6.4 percent but lower than the government’s target of 6.5 percent to 7.5 percent and the actual pace in 2013 of 7.2 percent. GDP is the market value of all goods and services produced in the country in a given year.
“Signs are positive for continued growth in investment. Improved business confidence and rising inflows of foreign direct investment will support private investment,” the lender said in the report.
Confidence in the economy has been reinforced by the investment grade sovereign credit ratings earned by the Philippines from major credit rating agencies, besides the country’s rise in global competitiveness indices, such as the World Bank’s Doing Business rankings where the country jumped 30 notches up to 108th of 189 economies assessed in 2013.
However, the ADB noted that job creation remains a critical challenge for the Philippines despite the strong economic growth it has achieved over the years.
“While economic expansion has exceeded 6 percent in the past two years, it has not generated enough jobs to reduce poverty,” it said, cited the rising number of unemployed and underemployed Filipinos, which rose to 7.5 percent and 19.5 percent in January, respectively.
This translates to nearly 3 million unemployed people and an additional 7 million underemployed.
Unemployment among the youth stood at a rate of 17.3 percent, up from 16.8 percent a year earlier and more than double the unemployment rate for the workforce as a whole.
“Improving the quality of jobs also remains a challenge, as nearly 40 percent of the workforce is in the informal sector or in vulnerable employment,” it added.
The lack of quality jobs reflects the slow reduction in the number of poor Filipinos, the ADB said, noting a small improvement in the poverty rate from 26.3 percent in 2009 to 25.2 percent in 2012.
Although there are expectations that the economy may benefit from the rehabilitation and reconstruction of areas hit by natural disasters, the ADB said significant impact may be reflected only in late 2014 and in 2015 as any direct and timely transfer of government resources to local governments and affected communities has been hindered by highly centralized national government systems.
“Also, regional and local administrations have limited capacity to implement reconstruction and rehabilitation programs. These matters are being addressed, which could accelerate work in the affected areas,” it said.