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“This is the best shot we’ve had for a while.”
This is how the top regional economist of a global banking giant described the current economic situation, saying the Duterte administration has a unique opportunity – not seen in the Philippines since the mid-1990s – to put the country on a more equitable growth path.
In an interview with the Inquirer, J.P. Morgan chief economist for Asean Sin Beng Ong expressed bullishness about the prospects of the economy for growth, addition that this is accentuated by the fact that the government’s economic managers recognize issues that need to be addressed and are focused on fixing structural weaknesses.
In particular, he noted that the government’s thrust toward helping more small and medium enterprises thrive is a positive step toward narrowing the wide income gap between the country’s richest and poorest citizens.
Ong pointed out that, apart from government policies, the local economy is also benefiting from favorable demographics, with more and more young people entering the workforce – a phenomenon that is also unfolding in Indonesia, Thailand and India.
As more young people enter the workforce, spending capacity and consumption levels rise, resulting in a virtuous cycle of economic growth. This, he said, makes the Philippines an attractive investment proposition because baseline growth will occur independently of the state’s policies.
Combined with the Duterte administration’s focus on the proposed P9-trillion infrastructure buildup, conditions are ripe for the Philippines to experience more sustained top line growth of “closer to 7 percent”, even as the benefits of that growth are spread more evenly across all socioeconomic strata.
Going forward, the J.P. Morgan official urged the government to open up the local economy to greater participation by foreign investors who can bring in more expertise and capital – especially in the infrastructure sector – while helping lower project costs through greater competition.
“A lot [of the current projects] are done by the local conglomerates,” he said. “We want to see more foreign participation. If you can bring in more foreign participants, it will cement the credibility of the country in terms of improving the investment climate.”
Ong also urged the government to pass the latest iteration of the Comprehensive Tax Reform Program to give the administration the wherewithal to fund its ambitious plans for building new airports, seaports and highways that will help bridge the economic gaps between the countries island groups.
“We need to see ‘quick wins’ and that’s where the CTRP comes in,” he said. “They have to pass this to improve the country’s credibility as an investment destination.”