ADB hikes Phl growth forecast

MANILA, Philippines - The Asian Development Bank (ADB) has raised to six percent its forecast gross domestic product (GDP) growth for the Philippines in 2013, from an earlier projection of five percent.

The country’s economy expanded a strong 6.6 percent last year, coming from a low base of 3.9 percent the year before.

ADB senior economist for the Philippines Norio Usui said the country is expected to experience robust growth over the next two years buoyed by strong consumption, increased government and private spending on infrastructure development, amid modest inflationary pressures.

However, remittance, service exports and portfolio inflows may pose macro stability risks.

“But the biggest challenge is to translate solid economic growth into poverty reduction by raising more and better jobs. Inclusive growth through job creation is still at its lowest,” Usui added.

Neeraj Jain, ADB country director for the Philippines, said governance reform and prudent management have laid the foundation for strong economic growth.

“The recent investment grade rating affirms the improved macroeconomic fundamentals and investment environment,” he said.

The Aquino administration is targeting GDP growth of between 6-7 percent this year and 6.5 percent – 7.5 percent in 2014.

Jain said it is vital for the country to have a stronger industrial base that will create inclusive and sustainable growth, as well as jobs. The Philippines has lagged behind Southeast Asian neighbors in the industrial and manufacturing sector.

He said the persistently high levels of unemployment and underemployment are still key areas of concern. He noted the continued deployment of overseas workers masks the severity of the problem.

Usui said 20 percent of the population are still underemployed and another seven percent are unemployed.

Employment growth averages a mere two percent per annum.

“That means the Philippines has to generate an average 800,000 new jobs annually to merely sustain its poor job generation, amid increasing interest from the investor community,” Usui said during a presentation yesterday.

He said the Philippines must not only create new jobs but high-productivity jobs.

“High productivity jobs are in manufacturing, the services sector productivity level is only half of what the manufacturing sector produces,” the economist added.

Jain said the Philippine government should look at specific bottlenecks in specific sectors that must be promoted to domestic and foreign investors, as well as bridge the gaps between investors and high-productivity jobs.

“Reforms must be further intensified if the business climate will be improved in the medium term,” Jain said. “There must be consistency in regulatory and taxation regimes in both the national and local governments level.”

For infrastructure spending, government must bring infrastructure spending up to six to seven percent of GDP, from 2.7 percent in 2012.