Economic prospects still bright, gov’t says

The Philippines will remain one of the fastest growing countries in emerging Asia this year and not even the high consumer prices of late will deter economic expansion, the Duterte administration’s economic team said yesterday.

“The Philippine economy is strong. This year, we will again be among the top performers in the region. The momentum is being sustained by policy and infrastructure reforms. Firm and decisive political leadership pushes forward these reforms,” Finance Secretary Carlos G. Dominguez III told a press conference.

Dominguez noted that foreign direct investments rose “sharply” in the first half, while domestic manufacturers ramped up importation of capital goods on expectations of a “growing domestic market.’

“In the short term, this may put pressure on the exchange rate and gross international reserves. But in the longer term, this is indicative of strong capacity building,” Dominguez said.

Dominguez was referring to the weakening of the peso against the dollar as a result of a wider trade-in-goods deficit, which also widened the current account deficit, putting pressure on the domestic currency.

Besides the weak peso, the Finance chief acknowledged concerns on the elevated inflation, as the rate of increase in prices of basic goods climbed in August to 6.4 percent, the highest in more than nine years.

“While the inflation rate kicked up, we do not see this as a structural infirmity. It is a transient phenomenon that all of government is now mobilizing to deal with decisively,” Dominguez said.

The Finance chief was referring to the draft executive order submitted by the Economic Development Cluster submitted for President Duterte’s signature, containing short- and long-term measures that will bring down food prices.

“Sometimes, we get distracted by the cloud and fail to appreciate the rainbow,” Dominguez said, citing that inflation “has been front and center in the public conversation about our economy” of late.

During the Philippine Economic Briefing, Socioeconomic Planning Secretary Ernesto M. Pernia noted that the Philippine economy had been “on a strong footing, growing by an average of 6.4 percent in the last eight years, the strongest since the mid-1970s.”

But in the first half, gross domestic product (GDP) growth slowed to a “respectable” 6.3 percent from 6.6 percent a year ago, noted Pernia, who heads state planning agency National Economic and Development Authority.

Pernia said the slower GDP expansion in the first six months was “due to prudent and judicious policy decisions for the environment, made by the government for long-term, sustainable, and resilient development.”

While first-half growth was slower than those posted by India, Vietnam and China, the Philippines’ economic expansion was faster than those of Indonesia, Thailand, Malaysia and Singapore, Pernia added.

“The economy is also undergoing structural transformation as growth is increasingly being driven by investments vis-à-vis consumption on the demand side, and by the industry sector—manufacturing, in particular—relative to the service sector on the supply side. In other words, the sources of economic growth have broadened and diversified,” according to Pernia.

“Moreover, our economy’s total factor productivity (TFP) has risen sharply, close to 3 percent, now the highest in Asean. These three points about our economy, namely—consistently high growth, structural transformation, and high TFP suggest that economic development is sustainable and capable of creating quality or more gainful jobs,” the Neda chief said.