Next President faces economic challenges

The next administration is expected to face tremendous economic challenges over the next several years despite the nation’s considerable economic progress under President Aquino, according to US state think IHS Global Insight.

Such challenges covered issues concerning business climate, rising poverty incidence, agriculture development and infrastructure, among others.

“Under President Aquino’s administration, the Philippines has been transformed from a ‘Pussycat to a Tiger economy.’ The next Philippines government will face the task of sustaining rapid economic growth in order to lift living standards and reduce still high levels of poverty, particularly in rural regions,” said IHS Asia-Pacific chief economist Rajiv Biswas.

In a research note, Biswas stressed the need of continuing with economic reforms and strengthening institutional governance to sustain a growth of 6 percent yearly from 2016 to 2020. The total size of the Philippine economy is likewise projected to grow from $300 billion in 2016 to $700 billion by 2025, becoming a trillion dollar economy in US dollar terms by 2030.

“This will make the Philippines one of the leading emerging markets in Asia,” he added.

However, a key priority for the next government will need to be about improving the business climate for investors. At present, the Philippines is ranked 103 out of 189 countries on the World Bank’s Ease of Doing Business Ranking for 2016.

“Although the Philippines has lifted its position significantly on this ranking under President Aquino, from 136th in 2012 to 103rd in 2016, the ranking of the Philippines is still far below some other Southeast Asian economies, notably Singapore, which is ranked first globally; Malaysia which is ranked 18th; and Thailand which is ranked 49th,” Biswas said.

“Improving the business environment for foreign investment into manufacturing and infrastructure will be a critical challenge for the incoming Philippine government administration, in order to boost manufacturing exports and employment,” he explained.

One of the more important economic priorities for the next government, according to Biswas, will be to tackle the high level of poverty that still persists in the Philippines.

He noted that an estimated 25.8 percent of the total population of the Philippines still live below the poverty line, and this ratio has only declined very gradually from a rate of 28.8 percent in 2006. Rural poverty in some regions is a key public policy challenge.

These problems have been aggravated by current dry weather conditions due to the El Niño phenomenon, which have resulted in severe droughts in parts of the southern Philippines, resulting in food shortages and severe hardship for the rural population in some areas. Agricultural production also fell by 1 percent  year-on-year in the fourth quarter of 2015, mainly due to El Niño and the impact of typhoon-related crop damage.

“Therefore, ensuring that the benefits of rapid economic growth do reach a wider share of the population will be a crucial policy priority for the next administration, and key strategies to reduce poverty will be to accelerate foreign investment inflows into manufacturing and infrastructure development. Increased investment in agricultural infrastructure and irrigation technology, as well as insurance schemes for farmers will help to boost rural incomes and mitigate risks associated with extreme weather events such as drought or typhoons,” Biswas said in his research note.

“The next administration will also need to ensure that trade and investment liberalization are high priorities on its policy agenda, through bilateral and regional trade and investment initiatives with key partners such as the Asean+3 nations as well as the European Union, the United States and India,” he further said.