PH gov’t sees sustained eco growth but stays alert for downside risks

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Socio-economic Planning Secretary and National Economic and Development Authority director-general Dr Emmanuel Esguerra expressed confidence about the country’s economic outlook for 2016 and beyond, but noted potential headwinds such as Japan’s fragile economy, slowdown in China, geopolitical tensions in the Middle East, and natural hazards, including the El Niño phenomenon. Photo courtesy of NEDA.
Socio-economic Planning Secretary and National Economic and Development Authority director-general Dr Emmanuel Esguerra expressed confidence about the country’s economic outlook for 2016 and beyond, but noted potential headwinds such as Japan’s fragile economy, slowdown in China, geopolitical tensions in the Middle East, and natural hazards, including the El Niño phenomenon. Photo courtesy of NEDA.
Socio-economic Planning Secretary and National Economic and Development Authority director-general Dr Emmanuel Esguerra expressed confidence in the country’s economic outlook for 2016 and beyond, but noted potential headwinds such as Japan’s fragile economy, slowdown in China, geopolitical tensions in the Middle East, and natural hazards, including the El Niño phenomenon. Photo courtesy of NEDA.

The Philippine government is certain of continued growth in 2016 and the near future, but remains watchful of downward risks to the economy, according to Socio-economic Planning Secretary Dr Emmanuel Esguerra.

“We are quite confident about the country’s economic outlook for 2016 and beyond, we have what it takes to sustain economic growth and make it inclusive,” Esguerra said in a presentation during the Transport Industry Directions 2016 event on March 8 at the Manila Hotel organized by the Philippine International Seafreight Forwarders Association and PortCalls.

He said the country has been experiencing robust and higher growth in the last six years, aided by structural changes led by the resurgence of the manufacturing sector and the rise in investments.

Overseas and local threats

On the external front, fragile growth in Japan and the slowdown in China, where the Philippines’ exports in 2015 dipped 11% and 24%, respectively, are seen to be “potential headwinds,” Esguerra, who is also director-general of the National Economic and Development Authority (NEDA), said.

Moreover, “asynchronous monetary policies in major developed economies would raise volatility of capital flows particularly in portfolio capital.”

Geopolitical tensions in the Middle East as well as the economic impact of an extended period of low oil prices could affect overseas Filipino workers, he said,  while the maritime dispute in the West Philippine Sea is seen as another risk.

Locally, Esguerra said “we continue to be concerned about natural hazards, including the El Niño phenomenon, although it is expected to weaken from March to May.” Thin power reserves also present dangers, especially with the potential impact of El Niño on the country’s hydropower supply.

Esguerra likewise noted that disruptions in the peace process and potential delays in infrastructure and reconstruction projects need to be looked at.

Moreover, logistics bottlenecks remain an issue requiring a long-term solution, he said.

Economic boosters

Despite the risks, the Cabinet official said the Philippine economy “is expected to exhibit continued resilience on the back of strong economic activities over the near term.”

He said “investments will be buoyed by the expansion of firms, marked by investment confidence in the country and the continued expansion of public and private construction.”

Likewise, household consumption will remain strong, supported by upbeat consumer confidence, low inflation, low interest rates, sustained flow of remittances, and better employment opportunities.

On the export of services, the prospects for business process management (BPM) and tourism remain positive, Esguerra noted.

The BPM industry continues to expand robustly with both voice and non-voice segments gaining momentum.  Esguerra noted that eight cities in the country have been included in the Tholons 2015 Top Destinations for the World’s BPO Industry, and these are Manila, Cebu, Davao, Sta. Rosa, Bacolod, Iloilo, Baguio, and Clark.

Government spending is slated to increase with the recently approved P3-trillion budget “supportive in expansion of social services and infrastructure.”

The recent downward trend in oil prices “helps temper the inflation and stimulates the economy by increasing the purchasing power of consumers and… by reducing input costs, (make) the manufacturing and delivery of goods and services less expensive,” Esguerra remarked.

The revival of manufacturing is expected to continue in the medium term, given the changes in regional production networks as labor costs rise in China, Esguerra noted. Construction and real estate driven by demand from BPOS and OFWs will likewise remain strong, while rehabilitation efforts are expected to pick up pace.

Tourism demand by both domestic and international travellers is also seen to remain strong.

Shoring up growth gains

With risks and growth drivers identified, Esguerra said action is still needed to keep the growth momentum going in 2016 and beyond.

“First, we need to sustain our investments in physical capital in order to close the gap with our neighbors and increase our competitiveness,” the NEDA chief said.

The government must also maintain high investments in human capital, particularly in health and education, as “we need to ensure the availability of a healthy, highly-trainable and skilled labor force and more innovators and entrepreneurs.”

With structural transformation now happening from low value-added to high value-added activities, Esguerra said this must be further facilitated, and “there must also be a deliberate strategy to prepare the workforce for structural transformation so that growth could be inclusive.”

The country must continue investing in socioeconomic resiliency, while promoting sustainable production and consumption patterns. These, Esguerra said, include disaster preparedness, income diversification, socio-protection, and insurance.

Moreover, the Cabinet official said it is important that “we continue to improve and strengthen the nation’s institutions including political ones as these play a critical role in the development process.”

Achieving lasting peace in Mindanao “will likewise be critical in reaping the growth potential of that region and lifting millions of our countrymen out of poverty.”

“Relatedly, we need to develop and implement a structural reform agenda that will result in an environment that promotes healthy competition, fosters and rewards innovation and encourages entrepreneurship,” the NEDA chief added.

Finally, the country needs to “ensure that successive medium-term plans (are) built on the gains of the previous administration and that they are guided by a long-term vision that is anchored on the Filipino people’s aspiration.”

25-year development plan

For this reason, Esguerra said NEDA has embarked on a long-term visioning exercise.

The Filipino 2040: A Long-term Vision Exercise is a 25-year vision guide for development planning across administrations and a guide for international development assistance.

“We have conducted several focused group discussions and nationwide survey and soon a social media campaign. This is a massive undertaking but we believe it is necessary,” Esguerra said.

“It will provide a basis of unity among Filipinos and a guide for development planning across administrations,” he added.

The first results will be shared in the next few weeks and Esguerra hopes the initiative earns the support of various stakeholders. – Roumina Pablo