PH no more the ‘sick man of Asia’
Posting an economic growth of 6.1 percent last year, the Philippines is no longer the “sick man of Asia,” the country’s chief economist said on Thursday.
“Overall, the Philippine economy’s performance in 2014 and the preceding years starting in 2010 shows how our country can no longer be called the ‘sick man’ of Asia,” said Socioeconomic Planning Secretary Arsenio Balisacan.
The economic growth in 2014 marked the second consecutive year the country posted the fastest rate in the region after China.
“Our economic growth is becoming more competitive with our East and Southeast Asian neighbors. We have avoided the dreaded boom-and-bust cycle that has hounded our economy for decades,” said Balisacan, also director general of the National Economic and Development Authority (Neda).
In his presentation at the 5th Ayala-UP School of Economics Economic Forum, he said the country’s growth rate of 6.3 percent in 2010-2014 was the highest five-year average during the past 40 years.
In the fourth quarter, the economy grew by 6.9 percent, better than the 6.3 percent in the same period in 2013.
The Philippines’ fourth-quarter gross domestic product (GDP) expansion was the third highest in the region, after China’s 7.3 percent and Vietnam’s 7 percent.
The fourth-quarter GDP growth was the fastest quarterly figure in 2014—the economy grew 5.7 percent in the first quarter, 6.4 percent in the second and 5.3 percent in the third.
State spending up
Balisacan told reporters that during the fourth quarter, the government made strides in addressing anemic government spending on public goods and services, which had slowed growth in the previous quarters.
Government consumption grew 9.8 percent in the fourth quarter, a reversal of the 0.4-percent decline in the same quarter in 2013 and of the 2.6-percent drop in the third quarter, Philippine Statistics Authority (PSA) data showed.
In a statement, the Department of Budget and Management attributed the increase in public expenditures in the fourth quarter to “effective” use of government agencies’ cash allocations, on top of the “timely” release of employees’ bonuses, including yearend bonuses and productivity enhancement incentives.
DAP ruling’s effect
Public spending slowed last year mainly due to the “chilling effects” of the Supreme Court decision that stopped the flow of more money through the controversial Disbursement Acceleration Program (DAP). Government agencies had also been more careful in their disbursements amid a more watchful eye of the Commission on Audit.
The Neda chief said the full-year GDP target for 2014 was not met mainly due to the sluggishness of government spending for the most part of the year. For the entire 2014, government consumption rose a mere 1.8 percent, lower than the 7.7-percent increase in 2013.
But “the worst is over” as far as the problem on underspending is concerned, Balisacan said.
“We have learned our lesson. We have identified the nature of the problem. The glitches in the previous quarters have been resolved, although not completely; some work remains in progress,” he said. “We made catch up in the fourth quarter; not all is lost.”
The effects of the uptick in government spending during the fourth quarter would spill over to this year, the Neda chief said. “The funds obligated in the last quarter of 2014 will impact on the economy, to be felt in the first half of the year. We expect a robust performance of the government sector in the first two quarters,” he said.
The government reported on Thursday that the GDP expanded by 6.1 percent in 2014—lower than the 7.2-percent growth posted in 2013 as well as below the 6.5-7.5 percent goal earlier set by the Development Budget Coordination Committee or DBCC.
The GDP growth last year was, nonetheless, within the 6-7 percent range, which Balisacan and Budget Secretary Florencio Abad had said was more “realistic” to be achieved.
The services sector contributed 3.4 percentage points or over half of last year’s growth, while the industry and agriculture sectors chipped in 2.5 percentage points and 0.2 percentage point, respectively, PSA data showed.
BPO, other growth drivers
Balisacan told a press conference that the growth drivers in services were business process outsourcing (BPO), real estate and renting, among other business activities.
In terms of year-on-year growth, the industry sector posted the highest expansion of 7.5 percent in 2014 and 9.2 percent during the fourth quarter.
“[T]he acceleration in industry growth was due to the double-digit expansion in construction, even as manufacturing remained as its biggest growth driver,” Balisacan said.
Despite missing last year’s target, Balisacan said the Philippines remained one of the fastest-growing economies in the region last year, posting a full-year GDP growth just behind China’s 7.4 percent.
In the October to December period, the services sector was likewise the biggest contributor to growth with a share of 3.3 percentage points. Industry contributed 3.1 percentage points, while agriculture had a share of 0.5 percentage point.
The sustained growth averaging over 6 percent during the past few years showed that the country was “maintaining the trajectory toward the path of high growth,” Balisacan said.
Sustaining robust growth over a long period of time would bring about an economy that attracts more investments and generate more jobs to ultimately slash poverty, according to the Neda chief.
At the Ayala-UPSE forum, Balisacan said the government “should be spending more” to place the deficit at 2 percent of the GDP.
In the fourth quarter, government consumption contributed only 0.8 percentage point to the GDP growth. Robust consumer spending amid strong flows of remittances from Filipinos overseas and an improving economy in general allowed household consumption to account for 3.7 percentage points or over half of the GDP growth in the last three months.
Despite potential external shocks to be posed by the downward trend in global oil prices as well as a still fragile world economy, the Philippines’ growth target of 7-8 percent for 2015 is “sustainable and achievable,” Balisacan said.
Other economic managers lauded the 2014 growth figures.
“Our improved growth in the last quarter of 2014 is a testament to the soundness of the Aquino administration’s fiscal management strategy … News like this is certainly a good way to begin the new fiscal year, with expenditures making a positive showing in the last three months of 2014,” Abad said.
For Finance Secretary Cesar Purisima, last year’s fourth quarter and full-year growth “resoundingly affirm that the Philippine economy is on an upward growth trajectory buoyed by strong macroeconomic fundamentals.”
Peter Perfecto, executive director of the Makati Business Club, said the group was “pleased” with the economy’s performance in 2014.
“Given that the growth is broad-based, featuring expansion in the three major sectors, we believe that this lays the foundations for more robust growth this year, especially in the first quarter. With our hosting of the Asia-Pacific Economic Cooperation meetings, the expected increase in public and private construction … will be able to greatly assist in attaining our year-end goal of around 7 percent,” he said.
PPPs to drive construction
“Furthermore, the most expensive public-private partnership (PPP) projects, such as the airports, subway and the Cavite-Laguna Expressway, will be bid out and some even awarded this year, which will drive up construction activities again,” he added.
Edgardo Lacson, Employers’ Confederation of the Philippines (Ecop) president, said the economy would further grow in 2015 due to accelerated infrastructure spending, low oil prices and renewed mining activity.
He said the start of election spending in the fourth quarter, resolution of the port congestion problem in Manila and a stable foreign exchange rate could further fuel economic expansion.
“For 2015, I see major drivers being improvement in infrastructure (ports, airports and roads), power availability, peace and order (the SAF massacre may be detrimental to the ongoing peace talks), stable peso, favorable business climate and political positioning for 2016 elections,” said Dan Lachica, head of Semiconductor and Electronics Industries in the Philippines Inc.
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