While PH is expected to sustain growth, it needs to work on ‘inclusive growth’ and business transparency
THEY all described the Philippine economy as being on the right track for sustained growth, and although there are challenges, it sure can weather these with the right financial policies and related programs. One speaker mentioned the importance of working toward inclusive growth, while the other stressed the need for monetary authorities to intervene if inflation continues to rise, and yet another cited a sustained boom in the property market as well as growing consumption as being right for the investors.
“Our economic growth is sustainable moving forward,” Socioeconomic Planning Secretary Ernesto Pernia said in a speech at The Manila Times’ “7th Business Forum,” held at the Marco Polo Hotel, in Davao City, on Friday, Feb. 9. “Our external position is pretty strong and favorable in terms of current account and external debt, OFW [overseas Filipino worker]remittances, merchandise trade, and net foreign direct investment [FDI].”
Noting that the FDI amounted to $7.9 billion in the 10 months to October, Pernia, who heads the National Economic and Development Authority (NEDA), described this as a reflection of investor confidence in the Philippine economy, whose total factor productivity had been the fastest among Southeast Asian nations. He said that by December, for instance, the FDI would have surpassed $8 billion.
Dubbed “The Philippine Economic Outlook for 2018,” the forum—with the theme “Build, Consume, Grow: Gaining Momentum for an Economy to Soar”—had as its honored guest President Rodrigo Duterte, who talked against a dictatorial rule happening in the Philippines.
The forum also gathered world-class economists, diplomats, government officials, and top business executives from all industries nationwide.
The second in a series of forums held outside of Metro Manila, “The Philippine Economic Outlook for 2018” also marked the granting of The Manila Times’ “Man of the Year” award to the soldiers who had fought and defeated the Islamic State-inspired terrorists in the southern Philippine city of Marawi, capital of Lanao del Sur, over a five-month battle.
Declaring martial law in Mindanao on May 23 after the Maute group burned establishments and abducted non-Muslim civilians as they stormed Marawi, Duterte now said he had lost 167 soldiers and policemen in the siege that ended on Oct. 24. Government troops rescued 1,780 hostages during the standoff that killed more than 900 terrorists and where more than 800 high-powered firearms and about 2,000 exploded IEDs, or improvised explosive devices, and booby traps were seized.
‘Man of the Year’
Saying that the award recognizes an “individual who had made great impact on the country over the last year,” Dante Francis Ang 2nd, The Times president and CEO, recalled in a speech that Duterte received the award last year for having captured the “imagination of the Filipino people and setting off a dawn of new politics.” He said, “It is to those who fought valiantly, including those who perished, that we offer The Manila Times’ ‘Man of the Year’ award for 2018.” Had the soldiers failed, he added, the ISIS, or Islamic State of Iraq and Syria, would have established a foothold in the Philippines. “Worse, this country would have been the springboard to larger, more destructive movements in the Asean region,” he stressed, referring to the Association of Southeast Asian Nations.
Accepting the collective award on behalf of the state forces that liberated Marawi, Gen. Rey Leonardo Guerrero, chief of the Armed Forces of the Philippines, said the men and women of the AFP “are humbled and deeply grateful” for the honor bestowed upon them. “This award is shared by every soldier, airman, sailor, and marine who continue to selflessly serve the nation and our people—be it in times of armed conflict or disaster for peace and progress,” he stressed.
It was also last year that the Philippine economy registered as the third-fastest growing economy in Asia, with a GDP of 6.7 percent, said Pernia, adding that this is expected to continue at least over the next two years. This year, the GDP—gross domestic product, which is the sum of goods and services produced in an economy in a given period—could reach 7 – 8 percent, or Asia’s second-fastest after India, according to Pernia. In 2016, the GDP grew 6.9 percent.
Saying that the Philippines’ economic growth has been consistent, even sharper over the last few years, Pernia stressed, “Our growth in 2017 was 6.7 percent, and it was within our growth target of 6.5 – 7.5 percent. We are poised to be among the rising economies in Asia.”
But economic growth should not be pursued “just for the sake of growth” or it’s just not about having a strong leadership, but the “whole package,” according to Birgit Hansl, World Bank’s lead economist and program leader for Brunei, Malaysia, the Philippines, and Thailand. She said the Philippines grew and developed very well, all right, but not as fast as its neighbors. “It’s the speed,” she stressed. “It’s the phase of growth and income growth, specifically—that is the difference.”
In a speech titled “The Philippines: Becoming a Middle-Income Country and Middle-Class Society,” Hansl said the Philippines needs to implement policies toward inclusive growth so it can ride favorable demographics and rapid growth in global trade. “So macroeconomic management should really focus on policies that support growth,” she added. “How you grow depends on how that growth is shared. And if you have a larger middle-class, if you have it distributed more equally, you grow faster. It’s a fact, it’s evidence-based.”
While trimming the red tape and increasing spending on infrastructure projects would help grow the economy, she said, the more important thing is how to make these more inclusive so as to grow the economy over the next 50 years, not just for the short to medium terms. It’s not very good to boast a young populace with proficiency in the English-language, for instance, if the students aren’t educated well and do not have the skills needed for a more diversified industries.
Also saying that the biggest challenge here, like in other countries, is to create a middle-class society, Hansl stressed, “The Philippines is slowly becoming a middle-class country, where a variety of economic classes live together side-by-side: the extreme poor and the extreme rich,” she explained. And while investments drive consumption, just like the increasing number of the middle-class does, she said, investors will come only when there is “openness” in a number of sectors.
Maintaining inflation target
The resident representative of the International Monetary Fund, Yang Yongzheng, for his part, stressed the need for the BSP, or Bangko Sentral ng Pilipinas (Central Bank of the Philippines), to step in if consumer price growth exceeds expectations. In a speech titled “Sustaining Growth and Advancing Inclusion in the Philippines,” Yang said the country’s monetary policymakers must be mindful of rising credit growth amid the Philippines’ continued economic expansion. “In that context, it is very important for the monetary authority to keep an eye [on]and make sure that inflation be maintained within the target,” he emphasized.
In January, inflation hit a three-year high of 4 percent year-on-year, with the BSP Monetary Board expecting a breach in the 2- to 4-percent estimates for 2018. This year’s forecast was then raised to 4.3 percent from 3.4 percent, while that of 2019 was made 3.4 percent instead of 3.2 percent.
Inasmuch as the government has announced that the current inflation rate is still manageable, the private sector has continued investing outside of Metro Manila, in support of the ruling administration’s goal to widen the reach of development and economic growth across the country. The country’s biggest conglomerates, for instance, have been planning to build between 20 and 25 malls over the next three years, or double the 5 – 10 malls during the past administration, according to Eduardo Francisco, president of the BDO Capital & Investment Corp.
Describing this development as “great news,” Francisco said, “If the private sector did not believe in this government, we would not be expanding our business. So the fact that we are borrowing shows that we are really supporting the government.” In a speech titled “How the Private Sector is Doing Its Part,” he stressed, “We are really growing at almost P300 billion of capex.” He also said the private sector believes in the Duterte administration’s centerpiece program of pouring billions of dollars into massive infrastructure projects dubbed “Build, Build, Build.”
The Philippine economy being on the right track is, indeed, more apparent in the real-estate industry, according to Sheila Lobien, the Manila-based regional director of Jones Lang LaSalle (JLL), a global provider of commercial real-estate services and investment management. “We are one of the best performers in the world and in Asia,” she said in her presentation titled “Philippine Property Market: Insights and 2018 Outlook.” she added, “The economy is booming. The world knows about the Philippines right now.”
This was the same sentiment that Francisco Dakila, Jr., managing director for Monetary Policy Subsector at BSP, put forward earlier in the day. The BSP, he said, sees exports recovering this year, as the country “remains in a position of growth.” In a presentation titled “The Philippine Economy: From Building to Sustaining Resilience,” Dakila described the country’s growth momentum as “broad-based”—as it has the support of a wide spectrum of sectors—and one that has an “uninterrupted expansion in 19 years.”
He stressed, “We have been able to sustain growth, and have not overheated.” He also maintained that while the inflation baseline for projection for 2018 is 4.3 percent, this would decelerate by 2019 and slow to 3.4 percent by 2020. “So it is manageable,” he stressed.
Describing the Philippines as being a “ ‘Goldilocks’ economy,” meaning, in a state of neither too hot nor too cold, Lobien said, “It’s just right for the investors who are in the real-estate arena to have a healthy business.” She expressed confidence on the long-term growth prospects for the office, retail, residential, and industrial property sectors. JLL saw last year the highest growth of the real-estate industry in terms of supply. The office segment, whose total supply has been increasing annually, had 1.2 million square meters of added space—comparable to building three SM Megamalls per year, Lobien said.
Saying that global BPO, or business process outsourcing, revenues could reach $250 billion by 2020, she noted that the Philippines has a $23-billion share of such. “If we can grow by around 16 percent in 2022, we could be a $40-billion industry,” she said, adding that India’s BPO is $150 billion.
But while the Philippines still has some of the lowest rental rates in Asia, Lobien said, a better transparency in doing business is a must for the country to move forward faster. “If we [want]to attract [more]foreign investors, the market needs to be very transparent,” she stressed, saying that the Philippine business environment had moved to mid-transparency in 2016 from very low-transparency in 2004.
PHOTOS BY RUSSELL PALMA