Despite projections of slower domestic growth in 2020 as the COVID-19 pandemic takes its toll on the global economy, there’s no stopping the Philippines to climb to upper middle-income country status this year, the country’s chief economist said.
Socioeconomic Planning Secretary Ernesto Pernia told the Inquirer that even with lower growth projections, the bid to achieve an upper middle-income status would no longer be delayed “as we’re already in the cusp of hurdling the threshold.”
Pernia, who heads state planning agency National Economic and Development Authority (Neda), said an achievable 3-4 percent increase in gross national income (GNI) per capita this year would raise the Philippines’ per capita income above $3,956, which (up to $12,234) the World Bank categorized as upper middle-income.
Latest data on multilateral lender World Bank’s website showed that the Philippines had a per capita GNI of $3,830 in 2018, using the Atlas method.
Last year, the Philippines should have had already moved up to upper middle-income status had it not for the late budget approval that slowed gross domestic product (GDP) growth to an eight-year low of 5.9 percent.
This year, the government targets a faster 6.5-7.5 percent growth, even as Neda estimates had shown a potential 0.5-1 percentage point (ppt) reduction in GDP expansion if the COVID-19 pandemic lasted until midyear.
For instance, London-based Capital Economics last week slashed its Philippine GDP growth projection for 2020 to only 4.5 percent.
When the Philippines becomes an upper middle-income country this year, it will lose by 2022 the access to preferential interest rates currently enjoyed on borrowings from its bilateral partners and multilateral institutions.
Given this, the Philippines aims to achieve “A” credit ratings in the next two to three years so it can continue borrowing at lower rates to finance massive infrastructure projects under the ambitious “Build, Build, Build” program.
Last week, economic managers expressed confidence that the government’s goal to slash poverty incidence to 11 percent by 2022 from 16.6 percent in 2018 would not be affected by any growth slowdown due to COVID-19.
After the Economic Development Cluster meeting, Finance Secretary Carlos Dominguez III pointed out that the job losses in the tourism and manufacturing sectors would be temporary and short term.
Since February, 66 mostly tourism-related businesses and some manufacturers temporarily closed down or implemented flexible work arrangements as the COVID-19 pandemic slowed tourist arrivals and delayed release of raw material imports that were subjected to quarantine.
Neda estimates showed potential job losses of 30,000-60,000 in the local tourism sector due to COVID-19. INQ