PH said to be ‘punching below its weight’

The Philippines needs to address infrastructure bottlenecks to prevent annual growth from sliding back to the 5-6 percent growth range, an economist at British banking giant HSBC said.

Frederic Neumann, HSBC economist based in Hong Kong, said the Philippines’ debt metrics were more favorable than those of its neighbors, which would bode well for the country if the US Federal Reserve were to start raising interest rates.

Many believe that the US Fed will raise key rate in 2015.

“But that doesn’t mean we should rest on our laurels,” Neumann said, noting that infrastructure was often cited as the biggest constraint to the country’s growth.

Citing an HSBC research paper analyzing the quality of Asian infrastructure, he said the Philippines was at the bottom behind Vietnam and India.

But he pointed to an interesting bit of information provided in the study. He said the Philippines did not rank last in terms of per capita income.

“That means poorer countries are starting to have better infrastructure than the Philippines,” Neumann said during a recent briefing.

While the task is daunting, he said, raising infrastructure spending is urgent. The public-private partnership (PPP) program alone cannot fill the vast requirements, he added.

“There’s such an overwhelming need in the Philippines, we can’t just rely on the PPP alone. Some stuff can be done by the government on its own, others have to be done by the private sector,” Neumann said.

The infrastructure spending of about 5-percent of gross domestic product (GDP) that the government had committed to would be the minimum required to ease infrastructure bottlenecks. If the ratio could be raised to 8 percent, he said, this would be better for the country.

While the business process outsourcing (BPO) segment is a success story in the Philippines, Neumann said he would not give up on the prospects of manufacturing making a bigger contribution to the Philippine economy.

The Philippines grew by an average of 4.8 percent during the nine-year Macapagal-Arroyo administration and the 2.3 percent growth rate during the short-lived Estrada administration.

Growth under the Ramos regime stood at 3.1 percent while that during the term of Corazon Aquino, the late mother of President Aquino, was at 3.4 percent.

Under the present administration, growth averaged above 6 percent, hitting 7.2 percent in 2013 alone despite the adverse impact of Supertyphoon “Yolanda.”

But what is widely seen to be crucial is the need to sustain higher growth trend in the years ahead.

“We have to move in the right direction. But to catch up with neighbors, we need to double the effort,” Neumann said.

While the Philippines could grow at slightly below 7 percent this year, which he described to be still “fairly robust,” growth could ease to 6 percent or below in the coming years if the government were to fail in addressing the country’s infrastructure needs.

He said the country would need more roads, airports and power generation capacity to support a higher growth trajectory.

He also said infrastructure spending would also be key to unlocking gains from tourism, which the Philippines could harness as another growth driver.

“The Philippines punches below its weight,” he said.  Doris C. Dumlao