MANILA, Philippines - The Philippines needs to ramp up infrastructure development to continue to achieve economic growth and avoid overheating, the Bank of the Philippines Islands (BPI) said.
BPI lead economist Emilio Neri Jr., in a lecture yesterday, said the country has to address the lack of infrastructure which is currently the biggest constraint to its economic growth.
While the economy has posted strong growth, infrastructure developments have not been able to keep up with the expansion, Neri said.
“(The economy) can grow by seven to nine percent if infrastructure can catch up with economic growth,” he said.
Failing to address the infrastructure gap however, Neri warned, would limit the country’s growth potential and risk overheating.
“If we don’t improve infrastructure, it is possible that the economywill overheat,” Neri said.
He noted that while infrastructure spending should be at five percent of the gross domestic product (GDP), the country has been spending below three percent of GDP.
Accelerating infrastructure development is also important given the upcoming Association of Southeast Asian Nations (ASEAN) economic integration, he added.
By the end of 2015, the ASEAN Economic Community would be established. The AEC would create a single market and production base to promote free movement of goods, services, investment and skilled labor within the region.
Neri noted that improving infrastructure, particularly seaports and airports, would facilitate the flow and trade of goods.
Apart from addressing the lack of infrastructure, he said it would also be important for the country to build up its gross international reserves to be able to respond to changes in investor sentiments and global financial markets, as well as achieve continued economic growth.
The economy grew by 6.4 percent year-on-year in the second quarter, driven by a strong industry and services sector as well as robust remittances.
The latest result brought the first semester growth to six percent.
The government aims to achieve 6.5 to 7.5 percent GDP growth this year.