The Philippines may lead economic growth in Southeast Asia in 2014, with gross domestic product (GDP) seen rising 7.5 percent, boosted by infrastructure spending and preparations by local businesses for economic integration in the region set for next year.
The forecast affirms the government’s target of sustainable 7 percent to 8 percent GDP growth for the long term necessary to alleviate poverty for the larger part of the country’s 90 million people.
“This economy is one of our top picks in the region,” Chevy Chase Trust Investment Advisors Managing Director David Ross told the 3rd Euromoney Philippines Investment Forum 2014 held in Paranaque City on Tuesday.
“Were looking at 7 and a half percent in 2014. For the long term it will go up 7 to 8 percent,” Ross said, adding that such rate is set to outpace other economies in the region.
For the Philippines to effectively bring down the level of poverty for its people, Finance Secretary Cesar Purisima said GDP growth must be sustained in the range of 7 to 8 percent for the long term.
“The target is to have sustained growth of 7 percent to 8 percent that will alleviate poverty. We do not want growth to go up and eventually go down. We want sustained growth,” Purisima said in the same event.
Asian Development Bank Vice President for East Asia Stephen Groff does not see significant negative impact from the destruction wrought by supertyphoon Yolanda, but said future growth will also depend on the speed of recovery among businesses and infrastructure investment in the affected areas.
While last year’s economy was investment-led, supported by election spending that perked up the first quarter of 2013, growth this year will be driven by infrastructure spending, Deutsche Bank Chief Investment Officer Frederico Ocampo said.
Ocampo sees a good time to invest in the Philippine market this year as businesses will also be “busy expanding” in preparation for the 2015 Asean Economic Community (AEC) integration.
BDO Capital and Investment Corp. president Eduardo Francisco warned, however, that the opportunities in store for the big establishments from the AEC might also come as a tough challenge for micro, small and medium enterprises (MSME).
“I worry for the MSMEs. For consumers, there would be more choices … but it would mean higher unemployment [as the MSMEs might come under pressure]. But there would be higher tourism,” Francisco said.
The economy is expected to benefit from the expected expansion and increased building of branches by big businesses in anticipation of more roads, transport and airport projects jointly undertaken as public-private partnership projects under the AEC.
Earlier, Socioeconomic Planning Secretary Arsenio Balisacan said the government sees 6 to 7 percent economic growth for 2014, driven mainly by infrastructure spending and a manufacturing boom.
President Benigno Aquino 3rd in the same forum fended off criticisms against his government’s “frail” delivery of promised growth, claiming that in fact his administration even “overdelivers.”
Citing the achievements during the first half of his administration, Aquino said the Philippines has made its economic environment conducive to investment.
“Over the past three and a half years, however, we have shown [the people] what it feels like to have a government that actually works for them — a government that does not break past promises, and in fact, underpromises, and overdelivers,” Aquino told participants of the forum.
He cited as “unimpeachable proof” of development the ongoing turnaround in the Philippine economy on a large scale, gaining even greater momentum.
“The days when we were called the Sick Man of Asia are becoming a distant memory. Now, we are seeing so many international organizations and publications expressing optimism about our future, and they have already referred to us as ‘Asia’s Bright Spot,’ or as the ‘New Asian Tiger’,” he said.
Parrying off what he viewed as undue attacks against his Cabinet, he emphasized that the economic targets set have been reached, “if not surpassed.”
“Going beyond expectations has become so common in our administration that I sometimes joke that some of my Cabinet members are becoming very erratic: they keep giving me targets, but they almost always end up exceeding them,” he said.
“So I guess they are hedging their promises,” he added in jest.
“I can begin by giving you a report card of sorts. Just 15 days after our last encounter, Fitch Ratings Agency gave the Philippines its first investment grade rating by a major credit rating agency in history. A little more than a month later, Standard & Poor’s followed suit; and later in the year, Moody’s did the same. So, in the short span of time since I saw you last, it has become unanimous: The Philippines is investment grade. In that period, our economy performed in an equally stellar manner. Despite the disasters that befell our country in 2013, the Philippines still posted one of the fastest growth rates in Asia at 7.2 percent,” Aquino said.
He noted that the country continued to climb up the World Economic Forum’s Global Competitiveness Rankings, placing 59th, or an improvement by 26 spots. Also, he cited marked improvements in the World Bank and International Finance Corporation’s Ease of Doing Business Report, moving up 30 places in just one year.
“The Heritage Foundation also bumped us up in its 2014 Index of Economic Freedom, placing us 89th out of 178 countries—an eight-notch improvement from the previous year.”
Aquino also rallied prospective investors to pour more money into the local economy, with a promise of unabated growth in the years ahead.
“At this point, it is natural for any forward-thinking individual to wonder: What is next for the Philippines? After turning the corner, securing its distinction as a vanguard of reform and stability, and sustaining its pace of growth, what does the future hold for one of the world’s emerging economies? I believe that now is a good opportunity to talk about our plans for the future—in the short, medium, and long term,” he said.
At the same time, Aquino harped on the 2013 survey of companies in Asia and Oceania, where the Japan External Trade Organization said that the Philippines is the second most profitable among ASEAN-5 countries, trailing only Thailand.
“This is particularly impressive, considering that in 2010, we were dead last,” he said.