BRITISH banking giant Standard Chartered Bank sees the Philippines’ trend gross domestic product (GDP) growth rate moving to 7-8 percent in the next few years if the government would be able to deliver on its promise to boost infrastructure spending, liberalize the economy and ease doing business.
In a briefing Tuesday, Stanchart chief economist for Asia David Mann also said the bank had upgraded its GDP growth forecast for the country this year to 6.8 percent from 6.4 percent. For next year, the baseline growth forecast is 6.7 percent.
Despite the stagnating growth in many of the advanced economies which dragged global growth down, Mann said Asia was still “the best economic neighborhood to be in.”
Within the region, Mann said the Philippines and Vietnam were two of the countries with the best growth prospects.
As far as attracting foreign direct investments is concerned, however, Vietnam was the one occupying the “sweet spot.” Based on the bank’s 2016 survey that asked foreign investors where they would set up shop if they would move capacity out of China, 42 percent of respondents pointed to Vietnam while only 3 percent pointed to the Philippines.
Mann said Vietnam had made it easier for foreign investors to do business there, attracting them with the right cost structure.
Nonetheless, the economist favorably noted the Philippines’ move to make investments a greater engine of economic growth to add to resilient domestic consumption. Investment as a ratio to GDP in the Philippines is now rivaling China’s current pace, he said.
The political issues currently creating noise in the country, he said, were not likely to affect long-term fundamentals.
Over the medium-term, Mann said the Philippines could boost its global competitiveness by investing more not just in hard infrastructure but in human capital, improving on nutrition and education metrics. It’s not just a matter of having more college graduates but having manpower trained in vocational skills needed by the growing economy.
The Duterte administration has vowed to boost infrastructure spending as a ratio of GDP to 5-7 percent.
With a combination of all the structural reforms, Mann said the Philippines could move to an even higher growth trajectory. “I think in the best of likely outcomes, we can’t rule out growth rate averaging in the upside scenario—if everything is delivered and everything goes smoothly—at 7 percent or above 8 percent.”
The beauty of sustaining a growth rate of at least 7 percent yearly, Mann said, was that this would mean doubling the economy every 10 years.
The country’s trend GDP growth rate under the Aquino administration (2010 to 2015) improved to 6.2 percent, beating the numbers during all his post-Edsa Revolution predecessors: 4.8 percent under Macapagal-Arroyo, 2.3 percent under Estrada, 3.1 percent under Ramos and 3.4 percent under Corazon Aquino.
In the second quarter of this year, GDP grew by 7 percent year-on-year, making the country the fastest growing in the region, again outpacing China’s growth rate. This brought first semester growth rate to 6.9 percent. Doris Dumlao-Abadilla