Despite devastation from a killer typhoon and lingering global financial woes, the Philippine economy is ending the year on a positive note. The country’s economic performance in 2012 has been so strong the World Bank says it will drive growth in a region that has suffered from a slowdown. The WB recently raised its 2012 growth forecast for the Philippines from 5 percent to 6 – the higher end of the government’s own full-year target. For the next two years, the WB sees continuing growth for the Philippine economy: 6.2 percent in 2013 and 6.4 percent in 2014.
Third quarter growth this year was a hefty 7.1 percent – one of the fastest in East Asia and the Pacific.
The World Bank credited the strong performance to the reform efforts of the Aquino administration as well as greater government spending. Much of the growth, however, continues to be driven by the billions remitted annually by nearly 10 million Filipinos working overseas. They are abroad for lack of opportunities in their own country. In October, 6.8 percent of the nation’s labor force was unemployed, with another 19 percent underemployed or having part-time jobs, according to the National Census Office.
Business process outsourcing, tourism, and construction due to a real estate boom continue to create more jobs. But creating the number and types of jobs that can start luring back overseas workers will require more foreign direct investments. Among the biggest challenges faced by the Aquino administration is to create the environment necessary for the country to compete with its neighbors in attracting FDI. Local manufacturing also needs a boost; having more products made in the Philippines is good for sustained economic growth.
Another major challenge – as acknowledged by the administration’s economic managers themselves – is making the growth more inclusive. The World Bank has pointed out the need for more structural reforms that will make the poor enjoy the benefits of growth. The WB also stressed the need for more investments in infrastructure, public education and health care. The World Bank noted that political stability and a popular government provide a window of opportunity for further reforms. Those reforms should lead to sustained and, equally important, inclusive growth.