PH needs reforms to sustain growth

HSBC cites high power rates, foreign equity limit


The Philippines has gradually broken away from its tumultuous past to become “one of the greatest comeback stories,” but more reforms were needed to sustain progress, according to British banking giant HSBC.

In a macroeconomic commentary titled “In a Sweet Spot: But is the Love for the Philippines Justified?” HSBC economist Trinh Nguyen upgraded the domestic economic growth forecast for the Philippines this year to 5.9 percent from 4.9 percent following the better-than-expected performance last year.

The HSBC economist also predicted in the Feb. 22 research that a sovereign investment-grade rating would likely happen by the second half of this year. But she noted that reforms to address long-standing challenges were still required to reverse the underperformance of foreign direct investments (FDIs) or long-term funds used to build or expand factories and other job-generating enterprises.

“While attaining an investment rating upgrade will likely have a positive effect on FDI inflows as funding becomes cheaper for corporations, foreign investors will be watchful of reform momentum such as improving electricity production, transportation and, most importantly, easing restrictions on foreign ownership,” Nguyen said.

On the whole, Nguyen said the Philippines looked on its way up with plenty of opportunities to look forward to. She noted that the midterm elections this May would most likely affirm President Aquino’s political clout through the ruling Liberal Party. “What’s more noteworthy to watch is the replacement of President Aquino in 2016, which would signal whether the reform momentum in the Philippines will be sustained,” she said.

The research said the 6.6-percent gross domestic product (GDP) growth posted by the Philippines last year was a “remarkable feat, especially given the backdrop of the global slump in 2012.” It noted that remittances had shielded the Philippines from sluggish external demand while timely fiscal and monetary policy also bolstered government and private consumption.

For this year, HSBC’s upward revision of its GDP forecast by one percentage point was to reflect a stronger growth in Japan, improved economic indicators from the United States as well as unusually accommodative monetary policy both abroad and at home.

“Acquiring cheaper and more stable sources of funding will lay a foundation for the government to focus on broader reform agendas. And a lot of work is still required,” Nguyen said. “While the country is endowed with natural resources, a skilled labor force, favorable demographics and a dynamic domestic market to counter the global slump, a still lackluster infrastructure and business environment hinder investment and productivity.”

Stagnant FDI inflows reflected challenges such as high costs of electricity, poor infrastructure, and restrictive ownership laws, she pointed out. “As such, we remain watchful of further reforms to transform the economy.”

Portfolio inflows have been strong, reflecting the bullish short-term economic outlook, but Nguyen said FDI inflows were more indicative of investors’ perceptions of the government’s progress in resolving long-standing challenges.

In this regard, the research said there were signs of progress, with the government stating it would consider revising the foreign ownership law. However, the HSBC economist said she believed it would take time before these reforms could be implemented and the earliest this could take place would be 2016, when President Aquino could afford to use his political capital to change the Constitution.

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  • disqusted0fu

    Instead of reforms, the Aquino administration concentrates on propaganda and press releases to maintain their image and popularity. Maintaining their image and popularity is what the Aquino administration works for, and they do that by deceit. But underneath that supposed good image and popularity is a dirty interior. Despite having a 6.6 growth in the economy, there still have been no resolve on unemployment and poverty, there are also no major FDI’s coming in the country, because again, all is only for their image and popularity.

    • regd

      Any particular reason why you are arguing in circles? 1 + 2 = 3 because 2 + 1 =3 hence 3 = 1 + 2. The 1 and 2 being the ‘image’ and ‘popularity’. 

      With this argument, a handful of people can mistook you as someone who has a brain.

  • JasonBieber

    We know this. It’s the Philippine President you have to convince.

    He feels that his popularity will be enough to translate to sustained economic growth…he does not realize that you actually have to do something real and work.He’s satisfied with arresting GMA and replacing the Chief Justice as a form of reforms when it’s not.

  • Lolek Pugeda

    Reform will mean little if all Filipinos, especially the poverty stricken, do not directly benefit from them, in one way or another. Reforms that benefit only the few are of little worth as compared to the reforms that benefit the majority, if not everyone. So I hope the government won’t spare much effort on the short term benefits but on the long term as well, as well as the implications towards the average Filipino.

  • CyberPinoy

    the real test of PH is when Pnoy are out after 2016 election, kaya dapat ang iboto ng mga pilipino ay ipagpapatuloy ang reporma, may malasakit sa Economy, hindi bias sa kanyang pamilya at kaibigan at higit sa lahat hindi makasarile kungdi lahat ng desisyon ay bayan muna ang iniisip.

  • tower_of_power

    To sustain growth, the formula is soooooooooo simple!!! All that is needed is an EVEN PLAYING FIELD as promised by Pnoy. So, kailan mangyayari eto?

    An even playing field calls for elimination of corruption, an efficient justice system, an effective education system. good peace and order, competitive cost of living, efficient transport system, equitable taxation …  just to mention some of the major areas requiring structural reforms  for an even playing field.

    Our neighbors have overtaken us and left us way behind …. all our government planners have to do is look at them and have an honest to goodness assessment and have the political will to make the necessary changes There is no need to reinvent the wheel … they just have to look at the reasons why our wheels are skidding. Our country’s “drivers” have to focus on driving … walang cutting trips … walang overcharging … dapat magissue ng resibo …. hahahahaha!!!

    Ang mga drivers natin kasi ang iniisip nalang ehhh kung papano maisahan ang mga taong bayan!!! Stop this practice and Pinas will reach its destination safely and smoothly … lahat ay relaxed and happy.


  • Ai

    The Philippines will never become an industrialized economy – the country’s economic downturn and upturn will always depend on OFW’s remittances and not on domestic output. Look at South Korea and Taiwan – the development starts with the innovations made by their citizenry – guided by a good government. And innovation is a result of a high quality education, strong agri-based economy (di nagugutom ang mga esudyante) and visionary government.
    Sadly, we don’t have these. Look at Malaysia and Vietnam- they do have these and knocking on the doors of Newly-Industrialized Countries.

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