THE Philippines is expected to continue posting strong growth without the risk of runaway inflation next year as economic planners see the emergence of more opportunities fortifying the economy against external headwinds.
At an Investor Conference Call held last week by the government’s Investor Relations Office (IRO), economic officials told local and foreign fund managers, analysts and other international stakeholders that the 2017 targets of robust growth and modest inflation are achievable.
“Bottom line is that the Philippines is on a solid footing despite the fragility of the global operating environment,” Francisco Dakila Jr., managing director for monetary policy at the Bangko Sentral ng Pilipinas (BSP), said in the conference call.
For 2017, the official target for economic growth is set at a range of 6.5 percent to 7.5 percent, while the inflation target is at 2 to 4 percent.
IRO Executive Director Editha Martin said the growth-and-inflation dynamics of the economy will continue to be favorable in 2017, and the achievement of targets should push the Philippines further into an enviable “sweet spot,” being able to post strong economic growth without suffering from runaway inflation.
Among the major Asian countries, the Philippines is so far one of the fastest growing economies this year, posting average gross domestic product (GDP) growth of 7 percent for the first nine months, surpassing China’s 6.7 percent, but trailing India’s 7.4 percent.
At the same time, the country’s buffers, particularly fiscal and monetary space, will help provide resilience to the domestic economy, the economic officials said.
Inflation, which has been below the target ceiling since 2009, is seen slightly inching up from an estimate of below 2 percent this year to around the midpoint of the official target band (2 to 4 percent) by next year, Dakila said.
Price stability is seen supported by rising investments, which should boost the economy’s productive capacity and, therefore, the supply of goods and services.
Dakila said growing investment is evidenced partly by increasing imports of capital goods, intermediate goods and raw materials.
Officials said the Philippines will continue to be an outperformer even as the global economy enters 2017 with uncertainties arising from key challenges, including a change in political leadership and an anticipated rise in interest rates in the US, the continuing process of “Brexit,” and a slowdown in economic growth in China and other major economies.
The Philippines, like other regional markets, has been spooked by the prospect of an interest rate hike in the US, which is expected to lure capital away from the local equities and currency markets. Asia, like other economies that have trade relations with the US, has also been apprehensive over the uncertainty of the trade policy of the new Trump administration, as well as the impact of a further slowdown in the Chinese economy.
While the Brexit continues to cast a pall of uncertainty over the prospects of trade with the UK partners, the Philippines has received an assurance from a UK official that British trade and investment will continue to increase in this Asian country despite Britain’s move to leave the European Union (See related story ‘Brexit is more an opportunity than risk in PH-UK trade’ on B1)
Additional growth drivers
Undersecretary Rosemarie Edillon of the National Economic and Develoment Authority (NEDA) cited other new opportunities opening up for the Philippines as possible additional growth drivers for the economy in 2017.
“We see certain growth opportunities beginning next year,” Edillon said in the same conference call, pointing out progress in the economic integration of the Association of Southeast Asian Nations (Asean), a market of about 600 million people, which could spur Philippine exports.
Edillon also highlighted the administration’s infrastructure agenda, which is expected to go full swing in 2017, the first year the government will operate under a Duterte-administration budget.
Under the 2017 budget, spending on public infrastructure is set at P860.7 billion. The amount is equivalent to 5.4 percent of the country’s projected gross domestic product (GDP) for that year, comparable to the average infrastructure spending in the Southeast Asian region of at least 5 percent of GDP. In the past, Philippine spending on public infrastructure lagged behind those of its neighbors.
“We see the [growth]momentum continuing,” Edillon said.
Another growth driver mentioned was the business process outsourcing (BPO) industry, which Edillon said should further develop. Under the official industry roadmap for the period 2016-2022 titled “Accelerate PH: Future Ready,” more companies are seen graduating to higher value-added business processes from voice to non-voice, which covers various back-office services.
The IRO said the Investor Conference Call is one of its latest flagship activities, attracting participants from more than 130 international stakeholders from Asia, Europe and North America.
“A best practice advocated by international financial institutions, including the International Monetary Fund (IMF) and the Institute of International Finance (IIF), the activity is aimed at enhancing the awareness of investors and other international stakeholders on the Philippine economy,” the IRO added.