Investments creating quality jobs vital to PHL growth–wb

MORE investments that can create quality jobs are crucial for the Philippines if it wants to continue increasing its potential growth rate, according to the World Bank.

In a recent briefing with reporters, Gonzalo Varela, World Bank Lead Economist and Program Leader of the Equitable Growth, Finance and Institutions Practice Group for Brunei, Malaysia, the Philippines, and Thailand said the country’s potential growth rate is currently between 5.5 percent and 6 percent.

Varela said the latest GDP projection of the World Bank is even better than this potential growth rate. For 2024, the World Bank said the country’s growth is forecast to reach 5.8 percent and in 2025, 5.9 percent. (See: https://businessmirror.com.ph/2024/04/02/persisting-higher-us-rates-tohurt-region-twice-wb/).

“What you see is that the economy has improved [and] has been very close to that potential output growth. So it has been on the above or below, but very close to that range,” Varela said.

“The important thing is that you get investment accelerations, you get reforms that stimulate productivity growth, so that potential output growth keeps growing and the economy can grow then accordingly, sustainably in a way that creates good-quality jobs,” he explained.

Varela explained that potential growth rate can be explained as the level of economic growth that is possible if the economy is efficiently utilizing all of its resources. The many ways it can be measured means it can only be pinned by a range and not a single growth rate.

“[It is the answer to the question] what is the growth rate of the economy if you’re using all of your resources efficiently? What would be the growth rate that the economy could afford?” Varela said.

Among the important steps the Philippine government has undertaken that could contribute to raising this potential growth rate, Varela said, is the passage of the Public Services Act (PSA).

The amendment, he explained, could help the Philippines attract more Foreign Direct Investments (FDIS) in “key enabling services” such as telecommunication and transportation. This will help address the country’s infrastructure constraints.

He added that another important step is the recent decision to allow foreign players in renewable energy. This will not only fast-track the country’s green transition but also create green jobs.

“Fully implementing the structural reforms that the governments, the two administrations, the preceding administration and this administration, have been working on, [the] PSA amendment, renewable energy, FDI liberalization and committing to fiscal consolidation, would be crucial for investment acceleration,” Varela said.

Ibon: Don’t forget wages

HOWEVER, more than these, Ibon Foundation Inc. noted that addressing the need for better pay for Filipino workers would help not just the economy but the lives of Filipinos.

Ibon noted that bills are being taken up in Congress to legislate across-the-board increases in the daily minimum wage of private sector workers nationwide.

In February, the Senate passed Senate Bill (SB) 2534 giving workers a P100 increase. Not to be outdone, the House of Representatives (HOR) a week after started deliberating various House bills increasing daily wages by P150 to P750.

Ibon said these wage hikes are urgent because the real value of the minimum wage in all the regions is now smaller than it was 34 years ago in 1989.

“A responsible and propeople government would be the last to think that workers and their wages are burdens on firms and the economy, and the first to think that higher wages are a key measure for upholding workers’ welfare,” Ibon said.

“Substantial wage increases are among the most important structural mechanisms for ensuring that workers get a just share of the fruits of their labor, as well as for improving equity and democracy,” it added.

Ibon noted that there have been some 370 wage orders in the country’s 17 regions since 1989 when wage-setting was regionalized, but these haven’t even been enough to keep up with inflation.

Compared to 1989, Ibon said the real minimum wage averaged across all regions was worth 26 percent less in March 2024, with the largest decline in BARMM at 52 percent and lowest increase of 0.3 percent in NCR.

Across all regions, Ibon said the average minimum wage is only P440 or just a little over one-third (36 percent) of the average family living wage (FLW) for a family of five (5) of P1,207, as of March 2024.

Of all regions, it said the NCR has the largest minimum wage of P610, but this is only half (51 percent) of the P1,197 FLW. In BARMM, the P361 minimum wage is not even one-fifth (18 percent) of the P2,053 FLW.