The Philippines, which mainly depends on consumer spending for growth, is said to have entered the early stages of becoming an investment-driven economy.
This was the assessment made by international financial services firm Citi, which said in a recent paper that the combination of robust economic growth and benign inflation in 2012 indicated that investments had started to play a more significant role in driving the economy.
Citi said the Philippines last year registered a “positive output gap,” a phenomenon in which investments and production within an economy exceed previous levels.
Should this persist in 2013, Citi said, the Philippines would enjoy robust economic growth without the baggage of faster inflation.
This is because higher investments, which boost supply of goods and services, tend to temper the increase in consumer prices.
The Philippines is thus expected to stay in the so-called sweet spot—a point where economic growth is high and inflation is modest.
“Clearly, this interpretation of a positive output gap suggests [that] investment-driven growth, if it persists, would not be inflationary,” Citi said in the paper authored by economist Jun Trinidad and titled “Philippine Macro View: Laying the Foundation for Investment-Driven Growth.”
The latest government report on the economy showed that the Philippines grew year on year by 7.1 percent in the third quarter of 2012, and by an average of 6.5 percent in the first three quarters of the year. This made the country one of the fastest-growing economies in Asia.—Michelle V. Remo