Philippine economy strong but unemployment remains challenge: ADB

MANILA, Philippines (Xinhua) - The Philippines remains one of the most resilient economies in Southeast Asia, but such growth is neither sustainable nor inclusive as joblessness remains a problem for most Filipinos.

"A stronger industrial base is vital for increasing jobs, and will help make growth more inclusive and sustainable," said Neeraj Jain, country director for the Philippines of the Asian Development Bank (ADB).

In its latest Asian Development Outlook 2013 (ADO 2013) released today, the Manila-based lender forecasts Philippine gross domestic product (GDP) to expand 6 percent this year and in 2014.

Inflation eased to a five-year low of 3.2 percent. The ADB said it's likely to edge up to 3.6 percent in 2013 on increased consumption and a rise in excise taxes on alcohol and tobacco following the passage of the sin tax law.

ADB's forecast GDP for this year is a bit slower than the 6.6 percent growth posted in 2012. But the ADB said upbeat business and consumer sentiment, robust private consumption, increased fiscal spending, a booming services and construction sectors and higher investment and exports will continue to support the country 's economy.

But a rosy economic outlook doesn't assure that that this will translate to a better life for most Filipinos.

"The Philippine economy continues to grow but Filipinos continue to suffer due to lack of job opportunity," Norio Usui, ADB senior economist, said in a briefing held at the launch of ADO 2013 in Manila.

Usui said the Philippines has a strong growth in its hand and the next step for the Philippine government is to translate this strong growth into more jobs that will benefit most Filipinos.

Indeed, according to ADO 2013, "persistently high" levels of unemployment and underemployment remain a key concern in the country. As the latest data from the National Statistics Office has shown, about 7 percent of the 40 million labor force are unemployed, while about 20 percent are underemployed.

"Continuous deployment of overseas workers masks the severity of the unemployment problem," Usui said, alluding to the over 10 million Filipinos working overseas.

Usui said that while the services sector, mostly thanks to a growing outsourcing industry, has provided more opportunities to Filipino workers, and this is not enough to significantly reduce unemployment and underemployment levels.

"This country has 40 million labor force, and then its labor force continues to grow by an average 2 percent (per year). About 800,000 new jobs should be created just to sustain the same level (of employment)," he said.

Usui said the country needs to revive its manufacturing sector to create more jobs.

"The manufacturing (industry) has higher labor productivity," he said.

Usui said the country's policy makers need to take advantage of the Fitch Ratings latest decision to grant the Philippines its first ever investment-grade credit rating to attract more investors to the manufacturing sector.

The ratings upgrade, Usui said, has huge implications as investors now see the country as a new production base. He added that China, South Korea and Japan are interested to invest in the country.

Jain said the government needs to address the infrastructure gap and implement a more predictable tax regime that will entice more investments to come in the country.

ADB Principal Economist Donghyun Park said foreign investors are "taking a serious look" at the Philippines, noting that foreign companies are looking to set up plants in the country.

But he said there are still bottlenecks such as the lack of technical personnel to work in the manufacturing sector.