Growth prospects for PH economy
Once again, the Philippine economy may be one of the few in East Asia that will post a respectable GDP growth of 5 to 6 percent in 2011, despite the double-dip recession that is threatening most of the developed countries. While its exports may come to a standstill, the Philippines has a sufficiently large domestic market—like Indonesia and Vietnam—to continue fueling its growth with domestic consumption and investment. At no other time in the last 20 years is the Philippines awash with local capital and enjoying relatively low rates of inflation and interest.
To further sweeten the pot, the Philippine government is also in the best position to lower the interest rate on its debt as the three credit rating agencies—Standard & Poor’s, Moody’s Investor Service and Fitch Ratings—have complimented the country’s economic managers for “the favorable developments in the country, like on the monetary policy side.” Representatives of the credit rating agencies in late September 2011 recognized the resilience of the banking system; the significant improvement in the fiscal position (budget deficit in the first eight months was only P34.5 billion compared to the P300-billion ceiling set for the whole year); and the very visible efforts of the government to improve governance, particularly with the passage of the Government-Owned or Controlled Corporations (GOCC) Governance Act of 2011. All these favorable developments could earn the Philippines an investment grade rating in the near future. Another feather in the cap for the Philippine economy was the recent awarding by the Emerging Markets magazine of the Euromoney group of the “Finance Minister of the Year for Asia 2011” title to Philippine Finance Secretary Cesar V. Purisima.
With all these favorable developments, Philippine GDP can still rise by 8 percent in the second semester, making a 6 percent growth for the whole year of 2011 still within reach. A close cooperation between the private sector and the government can make a strong recovery from the 3.4 percent growth in the second quarter of this year possible as investments take off in the last quarter.
The second quarter of 2010 was an abnormally bullish period for the national economy because there were three extraordinary forces that converged then: the billions of pesos spent by the candidates for the May 2010 elections, the peaking of the pump-priming that was a responsible response of the last administration to the Great Recession, and a surge in exports that were the short-term results of a 7 percent growth in the US GDP in the last quarter of 2009, a seeming recovery that was clearly a flash in the pan considering the double-dip recession that is staring the Americans in the face today. The second semester of 2010 saw things returning to normal, with political spending reduced to zero, the beginning of belt-tightening of the Aquino administration, and the rapid deceleration in the growth of export. Thus, with a lower base from which to grow, the possibility of an 8 percent growth in the second semester of 2011 is not an impossibility.
Those who have downgraded their forecasts for 2011 are basing their pessimism on the delays in the implementation of the big-ticket projects under the public-private partnership (PPP) initiative. There are, however, a good number of non-PPP projects that a revitalized Department of Public Works and Highways under the leadership of Secretary Rogelio Singson started to
aggressively implement by July 2011.
Besides, there are numerous smaller infrastructure projects at the level of the local government units that are being undertaken. Through the Center for Research and Communication, I work closely with a team of economists, management specialists, urban planners and public administration professors in helping develop and implement economic programs for municipalities and provinces all over the Philippines. Everywhere I see numerous versions of PPP projects that do not attract the same attention as the big-ticket items (e.g. MRTs, LRTs, airports, power plants, etc) that are regularly monitored by the press.
The LGU heads are keenly aware that they have a short window of opportunity to implement projects like farm-to-market roads, irrigation systems, public markets, school buildings, mini-dams and innovative renewable energy projects, etc. They are in a rush to implement these projects because they know that they only have some 18 months before January 2013 when it would be too late to show to their respective constituents that they deserve reelection because of concrete accomplishments. That is why I believe that LGUs will contribute significantly to the increase in investments for the next 18 months. Therefore, I am bullish not only for the rest of the year but also for the whole of 2012 during which I see a 7 percent growth of GDP as attainable.
Dr. Bernardo M. Villegas is senior vice president of the University of Asia and the Pacific. His email address is bernardo.villega[email protected]
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