Stronger economic growth seen in next 2 yrs
MANILA, Philippines–For the Philippine trade chief, 2014 was “a good pause” for the expected “strong charge” in the last year and a half of the Aquino administration.
Trade and Industry Secretary Gregory L. Domingo said that while 2014 was a good year, it was also beset by difficulties caused by the Manila port congestion, rising power rates, controversies involving the government and underspending, among others. These difficulties, he said, might have tempered the economy’s growth.
In the third quarter, the country’s gross domestic product (GDP) growth slowed to 5.3 percent, the lowest since 2011. This brought the average growth for the first three quarters of 2014 to 5.8 percent. For the full year 2014, the government was looking at a growth rate of at least 6.5 percent.
Slowdown a blip
“The (slowdown) is just a blip. The economy grew too fast from 2010 to 2013 and, usually, the trend is that it will slow down for a year before it goes back to high gear. In 2015, we can expect to see these high growth rates again,” Domingo said.
The Philippine trade and investment position remained resilient in 2014, as seen in the sustained strong interest from local and foreign investors, the steady rise in exports, the increase in business delegation and mission arrivals throughout the year, among others. And while the value of investments approved by the Board of Investment fell by 24 percent in 2014 to P354.5 billion, the number of jobs to be generated by these new projects rose by more than 50 percent from year-ago level.
“This is just a good pause before a strong charge. Our exports and foreign direct investments remained strong. For 2015, we expect GDP to grow by more than 7 percent,” Domingo noted. “It’s all glowingly bullish for next year.”
According to the trade chief, there are a number of factors that are expected to contribute to the attainment of the said goal: lower inflation; lower oil prices; substantial increase in infrastructure spending; faster rollout of public private partnership (PPP) projects; the pre-election spending for 2016, and the growing number of factories that were under construction in 2014 and were scheduled to open before the end of the term of this administration.
The country’s hosting of the Asia Pacific Economic Cooperation meetings in 2015, the Papal visit, the international trade events taking place and the recent inclusion of the Philippines in the list of countries eligible for the European Union’s new generalized system of preferences (GSP+) are expected to provide an added boost.
The GSP+ grants zero duty on Philippine exports of more than 6,200 product lines.
For Trade Undersecretary Ponciano C. Manalo Jr., the years 2015 and 2016 will be all about realizing all the optimism in the past four years and sustaining that momentum.
“It was not easy (to get to where we are now) because there was a lot of pessimism, a lot of disbelief before. All we have to do now is to do better, to do things that will improve everything we did in the past so we can say that we really have institutional gains for the economy,” Manalo said.
“In terms of investments and exports, there is no doubt that investments will be up in 2015 and 2016. All numbers indicate a strong GDP growth. OFW remittances continued to surge, while the business process outsourcing sector remained strong and has surpassed the 1-million mark in terms of job generation. Consumption patterns continue to be up as well. So you have all the elements that will push the economy forward. You cannot find anything in any of the indicators that will indicate that you will have bad years ahead,” he added.
Even the forthcoming formation of the Asean Economic Community did not dampen the optimism of Philippine trade officials.
According to Domingo, the Philippines can very well compete and take better advantage of the opportunities arising from the Asean integration, as the country is one of the most liberalized states among member economies of the Association of Southeast Asian Nations. And this is despite the restrictive economic provisions in the Philippine Constitution.
“We are poised to compete because we have liberalized our economy ahead of the others. Many of our business people and our sectors are already competitive and, therefore, any further liberalization will be to our advantage,” Domingo explained.
“Our economy is very strong even with those (foreign ownership) restrictions. Many countries including our neighbors in the north have a lot more restrictions than us, and they’ve shown tremendous growth. While these restrictions are irritants, they are not major blocks to our high growth,” he added.
Ensuring that the growth targets will be achieved, that the gains will be realized and that the benefits will be reaped is another story.
For many business groups and industry associations, the key is for the government to make a more aggressive push for reforms and to fast-track crucial infrastructure projects that will help ensure a more sustainable and inclusive growth as the economy continues to perform well.
Further reforms pushed
In an interview, Nadine Fund, general manager of the German-Philippine Chamber of Commerce and Industry (GPCCI), said the group’s “wish list for the administration includes the proactive approach in finding solutions to the port congestion problem, an issue that affects our member companies, regardless of their nationality and industry focus. We have received very good feedback so far on the private sector’s involvement and we hope for a continued collaboration with the government.”
In a separate interview, Iain Mansfield, director at the UK Trade and Investment in Manila, stressed the need for “continued progress on delivering major infrastructure projects through the PPP center.”
“Although delivery did accelerate in 2014, further investment in transport and energy could unlock significant additional follow-on investment for the country,” Mansfield said.
He also pointed out the need for port and customs reforms, including the completion of efforts to decongest Manila Port, greater computerization and internal reform within the Bureau of Customs, and the passage of the Customs Modernization Bill, and of the Competition Bill.
Henry J. Schumacher, vice president for external affairs of the European Chamber of Commerce of the Philippines (ECCP), said that while the local “economy behaved pretty well in 2014, inclusive growth and infrastructure development remained elusive.”
Employers Confederation of the Philippines (Ecop) president Edgardo G. Lacson similarly pointed out that while the year 2014 ended with many remarkable milestones for the Philippines, underlying problems and challenges continued to persist.
“Investment grade ratings was sustained. GDP growth may have dipped but remained one of Asia’s stellar performers. Bank interest rates at 5 percent favored business activities and expansions; overseas Filipino workers’ remittance of more than $25 billion is matched by the business process outsourcing (BPO) sector earnings; and business confidence is high. But the twin and interlinked problem of poverty and unemployment continued to elude solution despite the pleasing economic growth indicators,” Lacson said.
It would thus be crucial for the government to accelerate infrastructure spending next year to generate employment, as well as “increase agricultural productivity, address smuggling and port congestion, and ensure stable supply and competitive power cost to attract investments,” he said.
Lacson further stressed the need for the government to “reform tax rates to align with those in other Asean countries; stay on course with good governance; rationalize the number of nonworking holidays; pass an enlightened mining revenue sharing laws to reinvigorate the extractive industry; amend the restrictive economic provisions in the Constitution, and enhance the broadband to speed up IT applications.”
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