Bank exec: Philippines needs infra spending to sustain growth

CEBU, Philippines – The Philippines needs more infrastructure investments to sustain its growth, a top bank executive said.

Hongkong and Shanghai Banking Corp. (HSBC), stressed that more spending from the government means more growth in the economy.

HSBC had predicted then the Philippines will become the world’s 16th largest economy by 2050 buoyed by its good demographics and rising education standards.

The country is said to be entering the demographic “sweet spot” due to its young population with a median age of 23 years old. Being in the sweet spot stage means that majority of the population are between 15 and 65 working age for the next few decades.

Veloso said infrastructure to improve connectivity is especially vital for the Philippines because of its being an archipelago.

“[The Philippines] needs more airports to transport goods and services. You can’t just rely on seaports,” Veloso said, adding that the country also needs quality roads and bridges.

The bank CEO said infrastructure also means good hospitals and school buildings to boost the government’s social services.

Veloso cited that Cebu, being a major trade center in Visayas, needs more infrastructure projects that would improve its connectivity to other places.

He believed that Cebu should have a third bridge connecting it to Mactan Island and other projects such as a train and metro rail transit (MRT) systems to improve its transport system and ease traffic woes.

While Veloso thought that state spending on infrastructure has resumed, he emphasized the government still has a lot of rooms for growth in its spending activity.

Weak government spending had weighed on the country’s economic expansion in the previous quarters particularly in the first quarter of 2015.

But the government had said that infrastructure spending had picked up last quarter.

On transparency

In a recent media briefing during the Asia-Pacific Economic Cooperation (APEC) meetings in Cebu, an official from the International Monetary Fund (IMF) said the government needs to be transparent in its budget operations and push for infrastructure by being efficient in public investments.

Sanjeev Gupta, acting director of the IMF fiscal affairs department, said the Philippines needs fiscal reforms to help it allocate resources correctly and keep the public informed on how the government spends its budget.

Emerging economies like the Philippines, Gupta said, need enough resources to build more infrastructures and provide more social services.

Gupta explained the government has to strengthen fiscal transparency to raise revenues and improve the quality of its investments in various sectors.

“If we are going to strengthen investment, we must improve on transparency gaps… We have to ensure transparency and push for infrastructure,” the IMF official noted.

Fiscal reforms and transparency is a reform needed by the Philippines to improve financial information exchange for tax matters to raise its tax collection and curb tax evasion. Such reform is integrated in the financial development road map called the Cebu Action Plan the Philippines drafted for the APEC group.