Manila is seen to have the highest growth potential among Southeast Asian countries including Thailand, Indonesia and the Phillipines. Eugene Leow, economist at the Singapore based DBS Ltd said “The Philippines has the highest growth potential amongst the TIP economies”. The National Statistical Co-ordination Board (NSCB), Philippines, the policy making and co-coordinating body on statistical matters announced that in the first quarter GDP rose by 7.8 percent, the latest announcement on the rise in Philippine’s economy in the first quarter has disproved a previous Dow Jones Newswires poll that had projected the growth at 6 percent. Philippine’s fast paced economy had achieved its highest growth at 8.9 percent, six months after its new President took over the reins of the country. The Euro zone’s debt crisis and the U.S. slowdown did taper its progress; however the economy of the nation has remained stable at with a growth rate of 6.6 percent.
The first quarter results is surprising and noteworthy as it has gone past China which has registered growth of 7.7%, Indonesia’s 6.02 % and India’s 5.5 %. The Asian Wall Street Journal said the country has now entered the “demographic sweet spot”, a phrase normally associated to those economies which show resplendent growth mainly due to its young labor force supporting the pension system and an economy experiencing high economic growth rates due to a large base of consumers. The construction spending has increased by 33.7 percent and government spending rose by 13.2 percent, private consumption has increased in the country by 5.1 percent. Manufacturing and construction activity has increased by 10.0 percent and the services sector which accounts for half of the GDP was up by 7 percent. The context of the remarkable growth in GDP is the fact under the Aquino administration, the Philippines got the least FDI compared with other Southeast Asian neighbors. As per World Bank data, it received only a $ 1.87 billion in FDI compared to Vietnam which attracted FDI worth $ 7.43 billion. The Philippine economic performance under the Aquino administration is really commendable as the President has not made any significant changes in its fundamental policies to accommodate foreign money.
The progressive reforms of its President Benigno Aquino III and his vow to end corruption are one of the reasons for its growth in various sectors. His reforms list include the well publicized change in ombudsman, arrest of former president Arroyo and the impeachment conviction of the Chief Justice of the Supreme Court.
The S&P has upgraded its credit ratings for the country which will aid new investments for the country. The “investment grade” status will help the nation garner more international borrowings at competitive interest rates and gain access to the global investment pool on a wider scale. The World Bank and United Nations Economics and Social Survey of Asia (UNESCAP) have forecasted a solid 6.2 percent growth in its GDP for 2013, complementing a stunning performance in the preceding year.
Negative Growth Trajectory?
Despite impressive rates of economic growth, poverty, unemployment and underemployment still continue to bother the country. In the first half of 2012 the poverty rate stood at 27.9 %. The latest survey also shows that nearly 1 million people are unemployed in the nation. The official unemployment rate has increased from 6.8 percent in 2012 to 7.1 % in 2013, which means nearly 2.9 million people are unemployed. These figures clearly state that the country is no doubt experiencing an economic boon and macroeconomic profile stands at good heads, however the current growth trajectory is not showing any signs of poverty alleviation or creation of more jobs. Experts opines the economic boon in the country is confined only to a few sectors such as real estate, retail and BPO none of which are a source of quality and permanent labor to the country. Economic experts opine that the generation of jobs is a major indicator of the true economic state of a nation. The economic growth is based only on the fragile growth of the service sector and the overseas investments of Filipino workers. Despite the raise in GDP industrial and agricultural sectors, considered as the pillars of a stable economy are experiencing negative growth.
The manufacturing exports already hampered by the global economic downturn are further derailed by the appreciation of the Philippine currency, largely due to the ‘flood of hot money inflow’ due to the increase in stock prices.
However for the Aquino administration, there is no single formula for addressing the country’s economic challenges especially for creating more jobs. The government has introduced reforms such as the expansion of conditional cash transfer scheme, which provides financial benefits to indigent sectors in exchange for performance based improvements in crucial areas such as education. It would take lot of years to reverse the impact of the previous government’s counterproductive policies. The manufacturing sector of the country has to be revived for creation of jobs and for reducing its imports.
Philippines Economy Grows Despite Poverty and Unemployment