Philippines seen on verge of economic takeoff
All elements are in place, says former NEDA chief
By: Doris C. DumlaoPhilippine Daily Inquirer For the Philippines, 2012 does not mean the end of the world as predicted by the ancient Mayans, but could instead herald the beginning of a much-awaited economic takeoff, according to former Socioeconomic Planning Secretary Cielito Habito.
In a briefing for Malayan Bank last week, the economist from the Ateneo Center for Economic Research and Development said that after lagging neighboring countries in the last decade, all the elements for takeoff were in place.
The government is now in a position to accelerate spending after putting the brakes on spending that in turn gnawed at growth last year; infrastructure thus has no way to go but up.
Governance improvements are taking hold, sending a good signal to businessmen. Private domestic investment has come out of a decade of lethargy. Change is also coming to Mindanao, which promises to be a new growth pole. Japan and Thailand—hit by a massive earthquake and flooding, respectively—have recovered from their respective disasters and the indirect impact on the local economy is waning; and China is no longer the juggernaut it appeared to be but is now more an opportunity than a threat.
Based on Habito’s P-T-K gauge, referring to presyo (price), trabaho (jobs) and kita (earnings), the economist sees good indicators for this year.
On inflation, he projected that the uptick in consumer prices would be kept at 3-4 percent or well within the goal of the inflation-targeting central bank.
On jobs, he noted that the unemployment rate had gone down to 6 percent.
“We haven’t seen that in a while,” he said, adding that the rate would likely be kept at 6-7 percent.
With regards to incomes, Habito said it would be prudent to assume an economic growth rate of 4-5 percent this year.
The more aggressive, he said, could plan around 5-6 percent.
In the case of China, “China is no longer as fearsome as it used to be. Its own success is catching up with it. China is now an opportunity to sell goods than a threat. If you look at that huge market, then you can see how much potential that is,” Habito said, alluding to the likes of businessman Carlos Chan whose Oishi snack brand is making waves in China.
Habito added that there were some factories now returning from China, which has seen a sharp increase in labor costs. Related to this, manufacturing was thus seen as a renewed growth driver for the country. Habito said the Philippines could be competitive in food manufacturing, design-based products such as high-end apparel, furniture and fixtures as well as higher value-added consumer electronic products.
The economist also encouraged investments in Mindanao, citing huge untapped potentials such as in producing coconut, oil palm, rubber, coffee, cacao, cassava and fruits.
In tourism, he said “good promotion is essential, but not sufficient.” He noted that the excessive protectionism in civil aviation was not in the national interest. Likewise cited as a “critical and urgent constraint” was the Philippines’ category 2 in FAA [Federal Aviation Administration], effectively preventing local carriers from expanding their flights to the United States.
Medical, wellness and retirement tourism are also key components to boosting tourism in the Philippines, he said.
On the other hand, business process outsourcing was cited by Habito as a “recession-resilient” industry that was projected to grow by 20 percent each year over the next five years.