Philippine economy to grow by 4.8% in 2012—HSBC

MANILA, Philippines—The HSBC sees the Philippines rising by a faster pace in 2012, pinning its projection on the expectation that the government’s priority infrastructure projects, which have been delayed, would finally push through and cause a sudden spike in overall investments.

The international financial institution estimates that the domestic economy would grow by 4.8 percent next year from a projected 4.3 percent in 2012.

Frederic Neumann, managing director and co-head of the bank’s economic research unit for Asia, said in a press conference held in Makati City on Tuesday that fulfillment of infrastructure projects and other investments that might come in following the implementation of these projects would provide a significant boost to the economy and help it accelerate growth by about 5 percentage points.

The government’s priority infrastructure projects— which include airports and major roads, and are under the Public Private Partnership (PPP) program— have not been launched.

Under the PPP, the government is inviting private companies to invest in public infrastructure projects. The objective of the program is to meet the country’s infrastructure needs despite limited resources of the government.

The administration, which has been criticized for the delay in the implementation of the projects that were initially expected to be implemented earlier in 2011, said it has just been ensuring the observance of proper procedures and the adoption of safety nets against corruption.

Although the government has been criticized for the delays, HSBC expressed optimism that several of the projects would start almost simultaneously in 2012, thereby causing a sudden increase in overall investments.

Neumann said the strategy of President Benigno Aquino III of pursuing good governance and transparency in public service, while it might be causing delays in implementation of some projects, bore benefits.

“If the President succeeds in fully implementing his approach of good governance, this can generate much more confidence from the private sector and increase investments,” HSBC’s visiting economist said.

Neumann said that besides the private sector, the government should also spend for infrastructure. He said financial markets would not be rattled by a slow reduction of the government’s budget deficit if caused by prudent spending in infrastructure.

“Reducing the deficit is less necessary than ensuring that infrastructure is put in place.  Markets won’t punish the Philippines if it spends more on infrastructure if the country’s investment needs are clearly there,” Neumann said.

A 4.8-percent growth on 2012, although faster than the projected 4.3 percent in 2011, is less than the government’s much more bullish target. The government wants the economy to grow by at least 7 percent every year over the short to medium term.

Neumann said the country should address issues related to competitiveness of the export sector and inviting even more investments in order for the Philippines to grow by a much faster pace.

In the first half of this year, the economy grew by 4 percent.