The Philippines has cemented its position as one of Asia’s fastest-growing major economies despite uncertainties in 2015, and now appears en route to becoming an upper middle-income country over the next six years.
The country’s gross domestic product (GDP) averaged 5.6 percent in the first three quarters on strong demand and more jobs and investments.
National Economic and Development Authority (NEDA) Director General Arsenio Balisacan said strong domestic demand would enable the economy to grow by 5.9 percent in the fourth quarter, ending the year with a growth of at least six percent despite the devastation wrought by typhoons.
Balisacan said the impacts particularly of recent typhoons “Lando” and “Nona” were already factored in growth projection for the agricultural sector.
“The last two ones were damaging and there were serious losses and damage to infrastructure, but not in a magnitude that will adequately make a dent on growth prospects for the full year,” he said, noting that the typhoon-affected agriculture sector represents less than 10 percent of the country’s GDP.
The economy is boosted mainly by the continued strengthening of the industry and manufacturing sectors.
The services sector, particularly the information technology-business process management, also remained robust.
“This puts the Philippines as one of the fastest-growing major economies in Asia, just after India, China and Vietnam. Our year-to-date performance reflects a steadily growing economy, and we are very optimistic that the Philippine economy will grow at 6.0 percent for full-year 2015,” Balisacan added.
Economic growth target for 2016
Balisacan said economic growth target for next year remains at 7.0 percent, even as the Development Budget Coordination Committee (DBCC) has yet to revisit economic targets for this and next year.
“But I do think that the target of 7.0 percent in 2016 is still quite realistic. As you know the whole economy is improving, even though that the United States has started its interest rate hike . . . I think the market has already anticipated that so that the impacts are not likely strong especially for countries like us that have some good macroeconomic fundamentals,” he said.
The United States Federal Reserve has raised interest rates for the first time in nearly a decade by 0.25 percentage points.
Balisacan cited domestic sources for sustained economic growth, foremost among them investments and domestic consumption as well as low interest rates and good consumer sentiment.
“We need to re-balance our sources of growth so that we get more of those investments and we get more of trade and in the process we improve the quality of jobs that are made available for our workers . . . That would allow us to escape poverty for most number of our people,” he said.
Higher middle-income economy
Balisacan is optimistic that economic growth can further accelerate on the back of the recovery of advanced economies expected next year and of the global economy in the medium-term, bringing the country to higher middle-income economy status by the end of the next administration.
Citing a World Bank definition, he said the Philippines needs to achieve per capita income of USD 4,125 to USD 12,735 to become a high middle-income country. The country is currently classified in the lower middle-income group where per capita income ranges from USD 1,046 to USD 4,125.
“Given the backlogs that we have in infrastructure, in human capital and investment in innovations, you can take advantage of those backlogs by addressing them quickly so that we can raise the level of the potential growth of the economy,” added Balisacan.
To achieve this status, the NEDA chief underscored the need for the country to pursue policies and programs that will improve industries’ competitiveness and productivity and raise investments in human capital development.
“However, while the Philippine economy has been growing at a rapid pace in the last five years, much still has to be done to achieve even faster poverty reduction and more inclusive growth,” he said.
The government has been increasing its infrastructure investment from 1.8 percent of the country’s gross domestic product (GDP) in 2011 to 5.0 percent of GDP in 2016.
It is ramping efforts to address the issue of underspending on public infrastructure ahead of next year’s elections.
The capacities of the local governments in project planning and budgeting has been also strengthened.
Balisacan said it is imperative for the country to continue developing infrastructure, encourage technological innovation and pursue regulatory and structural reforms to unleash its potentials and maximize gains from regional integration.
“Through these, the country can further attract investment flows, as investors in advanced economies affected by the global financial crisis search for markets with higher returns and better prospects,” he said.
There are currently 12 awarded projects worth PhP217.42 billion in the Philippine public-private partnership (PPP) pipeline, two other projects under implementation, 13 other projects in different stages of procurement and three others for roll-out.
Human capital development
Expenditures on social services, particularly education, health, social security and housing, have shown significant improvement, indicating the country’s serious thrust of heavily investing in human capital development.
“For the years ahead, it is critical for our country to be able to take advantage of its relatively young population joining the labor force in the next decade,” Balisacan said.
The latest Labor Force Survey showed a new 10-year record low unemployment rate at 5.7 percent, mainly on the boost in the services and industry sectors.
This is the first time that the unemployment rate dropped below 6.0 percent, even better than the target set in the Philippine Development Plan of 6.6 to 6.8 percent.