Phl economy improves moderately (part 2)

According to the Institute for Development and Econometric Analysis, Inc. (IDEA) latest Industry Trends, given the economic environment in which the Philippine economy operates in the medium term, baseline forecasts for the Philippine GDP growth point to 4.1 percent in 2012, 4.2 percent in 2013, 4.1 percent in 2014, and 4.6 percent in 2015. In the medium-run, Philippine economic growth will be buoyed by Household Consumption and the gradual recovery in Exports, although these are equally delicate as the global economy. For that reason, Government Expenditure is expected to augment demand. On the supply side, the economy can depend on the Services sector and Public Construction. NPI, meanwhile, shall return to growth in 2012 at 0.5 percent before accelerating to 7.6 percent, 6.9 percent, and 9.8 percent in the next three years, respectively. This means that GNI growth would stay above GDP in the next three years after 2012.

Furthermore per IDEA, in the face of global economic slowdown, the growth in remittance will support the consumption-driven economy. With majority of the Filipino’s income going into consumption, the growth in OFW remittances can fuel the growth of the retail industry. Furthermore, the growth in income due to the development of the business process outsourcing industry and increase in government spending also supports the growth of the retail industry in the Philippines. The declining inflation, as well as strong credit activity, provide further boost to HFCE. On the downside, households might take a precautionary stance as seen in the recent global financial crisis and cut off some spending as the global economic uncertainty deteriorates.

Per same published report, according to IDEA, the government should provide stability to the Philippine economy through its finely tuned spending continuing well into the medium term especially that the government was able to shrink the budget gap to GDP ratio to less than 2.0-percent in 2011. With promises of the government to make up for the lack of zeal in spending the previous year, there is renewed optimism in helping the country address one of the major bottlenecks in attracting investments – that is, poor infrastructure. For 2012, the Department of Budget and Management (DBM) has allotted about PhP182.2 billion for the government’s infrastructure plan, which involves renovation and restoration of infrastructures like airports, roads, and bridges, and tourism facilities to help boost the industry.

The plan includes the PhP8.1-billion fund for the Department of Public Works and Highways (DPWH) for its construction of roads leading to airports and to roll-on/roll-off (RORO) ports going to the different tourist destinations in the country like Boracay, Palawan, Bohol, Bicol, Cebu, Mindanao, and Northern and Central Luzon. PhP1.2 billion will be allocated to the Department of Transportation and Communication (DOTC) for the construction of new airports located in crowded tourist spots such as the New Bohol International Airport in Panglao, Bohol and the Puerto Princesa Airport Development in Puerto Princesa, Palawan. These augur well, should implementing agencies immediately act on these funds to quickly pump-prime a slowing economy and to further up the confidence of investors. Declining tax effort and increasing yield of short-term Treasury papers, however, pose downside risks to government spending, according to IDEA.

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