Economic policies that have earned the Philippines its new nickname as the “Strong Man of Asia” have gained enough momentum to continue until after 2016, regardless of the identity of President Aquino’s successor.
Australia and New Zealand (ANZ) Bank in a report said while the current administration deserves credit for boosting business confidence and improving governance, many reforms began before and would continue after Aquino’s term.
“The Philippines has been benefiting from improved fundamentals even before Aquino came into power in 2010,” ANZ said Tuesday.
Over the last five years, the average growth of total investment rose to 8.2 percent annually from 4.4 percent during the last six years of President Arroyo’s term. The increase in investment also coincided with higher credit growth.
However, ANZ said the expansion in total investment has been more volatile during President Aquino’s term, as public investment has a tendency to be bulky and erratic.
The overall review in infrastructure projects at the start of President Aquino’s presidency was subsequently followed by pump-priming of the economy through higher fiscal spending.
“After the corruption investigations in 2013, growth in public investment eased yet again,” ANZ pointed out.
Government debt has also been on the decline since 2004. The most significant decline in public sector debt from a peak of 91.4 percent of gross domestic product to about 60 percent took place under Arroyo’s term. Since 2010, government debt has gone down to about 48.7 percent.
The bank said the decline during the Arroyo years was made possible by record primary budget surpluses. This means the government was making more money than it was spending, excluding interest payments.
Better fiscal management has allowed Aquino’s economic managers to hike spending on infrastructure and social projects.
Meanwhile, the booming business process outsourcing (BPO) sector, which now stands as a major component of the domestic economy, began as early as 1999. Tax incentives that BPO firms have relied on were also passed during Arroyo’s term.
“While an improvement in local sentiment has supported growth in the last five years, we see little risk of a reversal in the country’s growth momentum even after Aquino steps down in June 2016,” ANZ said. Paolo G. Montecillo