IMF explains drop in Phl's GDP ranking

MANILA, Philippines - A study commissioned by multilateral lender International Monetary Fund (IMF) showed that the Philippines continued to lag behind its neighboring countries in the Asia Pacific Region in terms of economic growth due to political uncertainty, weak economic performance, high government debt, low investments, and weak government spending.

The study showed that the ranking of the Philippines in terms of real gross domestic product (GDP) growth dropped to its lowest level of 22nd for the period 2005 to 2008 from 15th in 1965 to 1969.

The highest ranking of the Philippines between 1965 and 2008 was 12th from 1995 to 1999.

Willa Boots Tolo, author of the report and presently a bank officer at the Bangko Sentral ng Pilipinas (BSP), stated in the paper that the Philippines placed second in terms of highest per capita GDP in Asia way back in the 1950s but has now been overtaken by Malaysia at 16th, Indonesia at 10th, Thailand at 15th, and Vietnam at 7th place.

The ranking was led by China, India, Mongolia, Argentina, and Uruguay.

Tolo said the factors blamed that contributed to the weak economic performance of the Philippines included weak agricultural productivity; high government debt; low public, private, and foreign investment; weak research and development spending; low spending on education; lackluster tourism sector; relatively high income inequality; high corruption; strong population growth; more episodes of financial crisis; and political uncertainty.

She pointed out that the Philippines also lacked a sustained period of improvement in the key growth determinants indicating that a strong and persistent period of economic reforms has been absent.

“The Philippines’ mediocre performance in a number of indicators-particularly relative to its Asian couterparts-illuminates some of the existing pieces of the Philippine growth puzzle,” she said.

In order to catch up with its East Asian counterparts, she explained that the Philippines need to maintain macroeconomic stability, expand its fiscal space, and redirect public spending to agriculture, infrastructure, and research and development.

“Expansion of the fiscal space and thus scaling up spending on public investment requires raising tax revenue through both administrative and selective tax policy measures. This would include strengthening tax administration, reform in excise taxes, rationalization of fiscal incentives, and addressing exemptions in value-added taxation,” she added.

According to her, development in the agricultural sector could be supported by better irrigation, access to fertilizers, farm-to-market roads, and storage facilities.

The paper said the Philippine government should focus on public-private partnership (PPP) scheme launched by the Aquino administration for traditional and nontraditional infrastructure investments that is beneficial for maximizing the returns to development.

It added that the government should also strengthen its focus of education on the sciences in all levels would encourage future researchers and scientists who would be instrumental in nation building.

Latest data from the National Statistical Coordination Board (NSCB) showed that the GDP growth of the Philippines slackened to 3.2 percent in the third quarter from 7.3 percent in the same quarter last year due to weak global trade and underspending by the Aquino government bringing the GDP expansion to 3.6 percent from January to September this year.

Economic managers led by Socioeconomic Planning Secretary Cayetano Paderanga said it would be difficult for the government to meet the revised GDP growth of 4.5 percent to 5.5 percent set by the Cabinet-level Development Budget Coordination Committee (DBCC).