The Philippine economy may have surged in the first quarter of this year, but its growth is not inclusive enough, especially in providing employment to Filipinos, an economist said on Friday.
In a text message, University of the Philippines (UP) economist Benjamin Diokno said the economy is “certainly not inclusive given the weak employment numbers in January.”
Diokno is pertaining to the latest Labor Force Survey conducted by the National Statistics Office which showed the unemployment rate in January 2013 at 7.1 percent, higher than 2.8 million jobless persons in October 2012.
The number of underemployed Filipinos also went up to an estimated 7.93 million, placing the underemployment rate at 20.9 percent.
For National Economic and Development Authority chief Arsenio Balisacan, the challenge is to take advantage of the growth and make it more exclusive by generating more high quality jobs.
“The number of unemployed and underemployed people is quite high, plus one million new people entering the labor force every year,” Balisacan, who is also Socioeconomic Planning secretary, said.
To address the problem of unemployment, the government must create from one million to two million new jobs a year, he said.
Balisacan also hopes that the business sector would expand its investment interests and generate more employment.
“Going forward, we intend to focus the economy on priority sectors that are potential growth drivers and job-generators such as infrastructure, manufacturing, agriculture, tourism, logistics, BPO/IT [business process outsourcing/information technology], shipbuilding, housing, and the halal food industry,” he said.
Diokno also said that the country’s 7.8-percent gross domestic product expansion in the first quarter of the year is solid growth” coming from a higher than normal first quarter growth last year.
He warned that given the weak external sectors, the economy has to rely on robust domestic demand. Diokno said he doubts if the private construction sector can sustain its 30.7 percent growth.
“Private construction growth remains strong but it may not be
sustained in the next few quarters,” he said. CFA Society of the Philippines President April Lynn Tan pointed to government spending as the main driver of the first-quarter growth.
“[The growth] is better than consensus forecast of six percent. I think what is noteworthy is the strong growth of government spending and significant increase in capital formation of investment,” she said.
Tan added that robust government spending offset the weakness in exports and slowdown in consumer spending.
Earlier, the Department of Budget and Management said public spending continues to drive the economy forward, with Government Final Consumption Expenditure growing by 13.2 percent.
“Most notable is the contribution of public construction to our growth in the first quarter, which peaked at a 45.6-percent rate for the period,” Budget and Management Secretary Florencio Abad said.
Abad added that the expansion was driven largely by the acceleration of infrastructure and capital outlay investments, aimed at drawing more investors into the country and supporting its bid for inclusive growth.
In a related development, the Philippine Chamber of Commerce and Industry said the country’s current momentum will be sustained if infrastructure spending and consumption driven by remittances remain stable and consistent.
The PCCI is optimistic that with more infrastructure spending, industrial output will improve in the coming quarters.
In the long term, the PCCI said that strong growth must be generated from the agriculture and manufacturing sectors. It is investments in these sectors than can create quality jobs and decent incomes and help fight poverty.
Government’s consistency in fuelling economic activity and ensuring strong macroeconomic fundamentals has once again resulted to a strong gross domestic product (GDP) growth for the Philippines, it said.
“Credit should be given to government. Its performance continues to stir business optimism in the economy as the country position itself for higher growth,” said PCCI president Miguel Varela.
The encouraging growth in services and agriculture are also magnets for visitors, Valera said.
He said the slower growth of industry “is something we had expected primarily due to high cost of production and cost or raw materials. Plus the first quarter is normally a lean season with more production for export activities happening toward the second half of the year.”
While the organization credited the government for creating the Ease of Doing Business Task Force to address issues of competitiveness, PCCI stressed that the implementation of the game plan laid down by the National Competitiveness Council needed to be speeded up.
“Streamlining and standardization of business process and licensing system and the implementation of the Philippine business registry, which has been a work in progress for the longest time, should be implemented along measurable timeline,” Valera said.
The PCCI urged government to enhance the regulatory systems to support dynamic and proactive reforms to take advantage of the growth momentum. Among these are benchmarking of incentives especially in terms of supporting the entry and expansion of investments in very critical areas such as transportation and infrastructure that develop the value chains of agriculture and industries.
Another is a competition policy that would create favorable condition and create a truly dynamic competition for all private investments.
“A competition policy would bring down the message that the country does not play favorites but offers fair opportunities for all,” Valera said.
He noted barriers that hinder investments in key sectors of the economy. If the country is to benefit from expanding integration with the rest of the world, government may need to relax some of the rules that restrict the entry of foreign capital in certain investments and in the practice of professions, Valera added.