The Philippine economy is seen to expand at an average of 6.4 percent from 2013 to 2016, as the government continues to improve the investment climate in the country, credit ratings agency Standard and Poor’s (S&P) said.
In its recent supplementary analysis, S&P estimated that the country’s gross domestic product (GDP) for this year will accelerate to 6.9 percent, higher than the 6.6 percent growth in 2012.
Its estimate is within the 6-percent to 7-percent target of the government this year. The ratings agency also projected the country’s growth to slow down to 6.1 percent by 2014, 6.5 percent by 2015 and 6.2 percent by 2016.
It said that the Philippine economy’s growth trajectory has moved onto a higher plane in recent years, and good prospects for further improvement were seen given the government’s ongoing and proposed reforms.
“We project growth to increase to 6.4 percent for 2013 to 2016. In the forecast period, we expect the economy’s growth potential to expand because of the administration’s effort to reduce infrastructure shortcomings and improve the investment environment,” it stated.
S&P noted that, “the government is better positioned to meaningfully boost infrastructure spending and reverse a long period of negative real growth in capital expenditure” with ongoing fiscal consolidation, and administrative reforms that are improving budget execution and procurement.
It lauded the proposed P2.268-trillion 2014 budget, which targets a 30-percent rise in capital outlay to about 4 percent of gross domestic product (GDP).
“This target is consistent with the government’s goal of limiting fiscal deficit to 2 percent of GDP and rests on realistic revenue assumptions,” it stated.
Furthermore, the ratings agency said that moves to alleviate administrative and legal obstacles to investment augment increased efforts to boost infrastructure spending.
It cited efforts from the government, such as the proposed amendments to the Build Operate Transfer Law and to the law governing land acquisition for infrastructure, specifically aim to speed up infrastructure development by making public private partnership (PPP) projects easier to implement.
“Additionally, the rationalization of fiscal regime for mining, amendments to the Cabotage Law, and proposed changes to the foreign investment negative list are all aimed at making the legal environment for investment easier,” it added.
However, S&P added that the employment growth figure remained low despite the country’s robust growth.
It cited the unemployment ratio of 7.5 percent at the end of the first quarter of 2013, despite record-high GDP growth of 7.8 percent year-on-year in the quarter.
It said that, “the apparent disconnect between growth and employment highlights the absence of a comprehensive long-term industry plan as successive administrations have been inclined toward minimal state intervention in the economy,” it said.
“The administration is likely to consider some targeted intervention within an industry policy framework to enhance employment prospects and preserve social and political stability,” S&P suggested.