MANILA, Philippines – The Philippine economy is expected to grow by 6.2 percent in 2013, driven by strong private consumption, according to a survey released by the United Nations Economic and Social Survey of Asia and the Pacific (UNESCAP) yesterday.
In its briefing paper, UNESCAP noted while there could be threats of poor global demand, the Philippines could bank on its aggressive investment programs.
“Poor global demand, including a slowdown in major trading partners such as China, could impede (Philippines) economic expansion, however. Speedy growth could materialize if progress on the Public-Private Partnership (PPP) gains more momentum, helped by the upgrade of the country’s rating to investment grade status in March,” it said.
PPP is a government initiative to boost investment and, at the same time, provide the public with adequate, safe, efficient, reliable,and reasonably-priced infrastructure and development facilities while affording the private sector a level playing field, reasonable returns and appropriate sharing of risks.
Early this year, the government approved four big-ticket infrastructure projects under the PPP program totaling more than P80 billion.
Fitch Ratings early this month raised the Philippines’ credit rating to investment grade.
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According to the survey, the Philippine government expects to raise infrastructure spending to five percent of GDP (gross domestic product) by 2016 from two percent in 2012.
Aside from the slump in its regional partners’ growth, another major concern for the Philippines, UNESCAP noted, is higher job creation in the formal sector which remains a key challenge for the country’s inclusive growth.
“Employment continued to grow, but at a slower pace of 1.3 percent in 2012, compared with 2.4 percent in 2011. However, informal employment as a share of non-agricultural employment remained high at 70.1 percent. The youth unemployment rate also stood at 17 percent, substantially higher than the average unemployment rate, and as many as one in four youth were neither
in education nor employment,” the survey said.
But it noted that all other economic indicators are within government’s targets.
“Inflation softens despite adverse weather conditions. Average annual inflation rate declined from 4.8 percent in 2011 to 3.1 percent in 2012, as food and fuel
price increases moderated. Despite strong domestic demand, inflation was comfortably within the official target range,” it said.
Active fiscal policy is supporting the economy, it added.
“More active fiscal policy has resulted in a manageable increase in budget deficit, from 2.2 percent of GDP in 2011 to 2.6 percent of GDP in 2012. To finance the development expenditures, the Government is focusing on widening the tax base and efficient expenditure management,” it noted.
But it further noted that monetary policy faces pressures on exchange rate and asset prices.
“Monetary policy was supportive; the central bank cut the overnight rate four times in 2012 to a record low level of 3.5 percent,” it said.
The UN survey also noted that while the banking sector remained generally healthy, the central bank used various
macroprudential measures to ensure financial stability.
“Foreign direct investment inflows enjoyed a marked increase in anticipation that the country’s sovereign rating would secure investment grade status. It did in March 2013,” it said.
Meanwhile, the UNESCAP also noted that the Philippines’ growth projection for 2013 would outpace that of the region and is relatively higher than its neighbors.
Based on the survey, growth in developing Asia-Pacific economies is expected to increase slightly to six percent in 2013 from 5.6 percent in 2012.
“The increase is partly due to an expected improvement in global demand arising from steady, although subpar, growth in the United States and a limited rebound in the performance of major emerging economies,” it said.
It noted that the two regional giants, China and India, are expected to rebound from a slowdown in 2012. China is expected to grow eight percent in 2013, slightly up from 7.8 percent in 2012, while India is expected to recover from its relatively low five percent growth in 2012 to 6.4 percent in 2013.
Improved global trade, the survey said, is expected to support growth in export-led economies, such as the
Republic of Korea (from two percent in 2012 to 2.3 percent in 2013), Hong Kong, China (from 1.4 percent to 3.5 percent) and Singapore (from 1.3 percent to three percent).