HSBC: PH may be doing well, but vital reforms still needed

The Philippines may be doing well economically, but it still needs to undertake more reforms to fill the vital infrastructure requirements of the country—something public-private partnership (PPP) programs can not fully cover, economists from British banking giant HSBC said.

In a briefing Tuesday, Frederic Neumann of HSBC’s Asian economic research unit said that the challenge now facing Asia is for the region to make economies more efficient.

“Productivity growth is one of the keys to avoid a hard landing when liquidity dries up at some point in the future. And here, the Philippine government has done some progress. But across the region, we haven’t seen big structural reforms,” he said.

In the case of the Philippines, Neumann said demographics and education trends were showing that the country had a great potential.  In a report issued last year, HSBC predicted that the Philippines could become the 16th largest economy in the world by 2050.

“But that’s the promise, that’s not destiny,” Neumann said, adding the country would sow what it would reap.

“We’re at the sweet spot, but delivering the right policies will take us there,” he said.

Trinh Nguyen, HSBC economist for Southeast Asia, added that the Philippines was “one of the greatest comeback stories” in the region.

This year, HSBC sees the Philippines growing by 5.9 percent and inflation averaging at 3.6 percent.

HSBC also expects the Bangko Sentral ng Pilipinas to keep its key policy rates at 3.5 percent, but it also sees further rate cuts on the special deposit accounts (SDA).

The economist said that the peso could settle at 39.50 to the US dollar by yearend.

But the Philippines needs to address weak infrastructure such as high cost of power, to boost inflow of foreign direct investments, she said.

“In a way, it’s a victim of its own success story. When you have high economic growth you also have higher infrastructure requirements,” she said.