Infra spending needed to boost growth to 8-10%

The Philippine economy is still on an upswing but to hasten the pace of growth of 8-10 percent, there must be greater investment in infrastructure alongside further governance reforms to stimulate private sector investments, according to former economic planning secretary Cayetano Paderanga Jr.

Speaking at a forum organized last week by BPI Securities, Paderanga said the stock market was still backed by good macroeconomic fundamentals. He said there was room for “further upside in equities” on the back of continued demand for local assets but added that the government must work to make available more financial instruments.

“Just the inflow of resources mean there will be continuing demand for financial instruments but there should be an increase in the supply of financial instruments,” the prominent economist said. For instance, he said pension funds like the Social Security System and the Government Service Insurance System could put up an OFW (overseas Filipino workers’) fund.

He added that the key risk factors to watch out for included the pace of the US Federal Reserve’s tapering of its monetary stimulus, challenges to global economic recovery, turbulence in emerging markets especially arising from China’s economic woes, natural disasters as well as asset price bubbles.

“The underlying trend of the economy is still upwards,” Paderanga said, adding that the country could still maintain a growth rate of at least 6 percent based on traditional drivers, but he noted that additional investments were needed for growth to surprise on the upside.

If tourism growth would continue, he said this could be another key driver for the economy.

The Philippine economy grew by 7.2 percent last year, making it the fastest-growing in Southeast Asia. The country is growing at the fastest pace in post-Edsa Revolution history.

During the nine-year Arroyo administration, average growth was 4.8 percent while during the short-lived Estrada administration, economic expansion was at a meager 2.3 percent. The trend growth rate under the Ramos regime was 3.1 percent while that during the term of Corazon Aquino, the late mother of President Aquino, average growth was 3.4 percent.

“For me, infrastructure support is important and the other shoe is governance. We have to bring down the cost of doing business,” Paderanga said in an interview after his presentation. “Other countries have grown by 8 to 10 percent, why not us?”