Neda chief dismisses PH fears of ‘overheating’

Citing massive investments in infrastructure and human capital development, the country’s chief economist on Friday dismissed fears from risks earlier flagged by the World Bank that could lead to an overheating Philippine economy.

“As we tread a high growth trajectory, risks are typically present on both domestic and external fronts. Nevertheless, we remain vigilant in monitoring these developments. And we already have the platform to effectively address these concerns,” Socioeconomic Planning Secretary Ernesto M. Pernia said.

Pernia, who also heads the state planning agency National Economic and Development Authority, was reacting to the World Bank’s April 2018 “Philippines Economic Update: Investing in the Future” report released this week, which flagged several domestic and external risks to growth, including overheating.

“The economy is currently growing at its potential rate, and the average capacity utilization in the manufacturing industry remains high, with all major industries operating at near full capacity. Moreover, unemployment reached record lows in recent years, signaling less spare labor capacity, although underemployment remains high. In an environment of increasing fiscal spending and continued high credit growth, the risk of the economy overheating is increasing,” the World Bank said.

But for Pernia, solid macro fundamentals as well as sustained reforms would lead the country to a higher growth path without overheating.

“Reforms are gaining traction with the groundwork for change already initiated in 2017. Some of these reforms are focused on easing business transactions with the government, filling the infrastructure gaps, and improving both the quantity and quality of the human capital in the Philippines,” Pernia said.