Job­less­ness a blot on PHL’s growth lead

Business World - - FRONT PAGE - By Melissa Luz T. Lopez Se­nior Re­porter

THE PHILIP­PINES can be ex­pected to lead growth across ma­jor Asian economies, ex­cept In­dia, up to 2019, ac­cord­ing to an In­ter­na­tional Mone­tary Fund (IMF) re­port that nev­er­the­less showed the coun­try suf­fer­ing the worst un­em­ploy­ment in South­east Asia in the same years.

The mul­ti­lat­eral lender sees world out­put pick­ing up to 3.9% an­nu­ally for 2018 and 2019 com­ing from 3.8% last year on the back of “faster- than- po­ten­tial” ex­pan­sion among ad­vanced economies.

World out­put ap­pears to be more up­beat given strong mo­men­tum, fa­vor­able mar­ket sen­ti­ment, as well as “ac­com­moda­tive” fi­nan­cial con­di­tions, which is boosted by ex­pan­sion­ary fis­cal pol­icy in the United States. The par­tial re­cov­ery in crude prices also pro­vides room for growth in oil-ex­port­ing coun­tries to grad­u­ally im­prove, the IMF said.

This, in turn, will lift growth prospects for emerg­ing mar­kets like the Philip­pines.

“The cur­rent strong growth of the global econ­omy will help boost growth in emerg­ing mar­ket economies,” IMF coun­try rep­re­sen­ta­tive Yongzheng Yang said in an e-mail re­sponse to queries.

“In the case of the Philip­pines, this means a fa­vor­able ex­ter­nal en­vi­ron­ment for its ex­ports, OFW (over­seas Filipino work­ers) re­mit­tances, and BPOs ( busi­ness process out­sourc­ing).”


The IMF ex­pects Philip­pine gross do­mes­tic prod­uct to ex­pand by an­other 6.7% this year and 6.8% in 2019, steady from 2017’s 6.7%.

While the fore­casts fall short of the 7-8% an­nual growth goal set by the ad­min­is­tra­tion of Pres­i­dent Ro­drigo R. Duterte up to 2022, when he ends his sixyear term, they are bet­ter than those of most ma­jor Asian economies — ex­clud­ing In­dia (7.4% this year, pick­ing up to 7.8% in 2019) — the 5.3% and 5.4% av­er­ages

of the five ma­jor As­so­ci­a­tion of South­east Asian Na­tions mem­bers (ASEAN-5) for the same re­spec­tive years, 6.5% and 6.6% for “Emerg­ing Asia” (ASEAN-5 plus China and In­dia) as well as 5.6% for both years for the en­tire Asia.

Mr. Yang said the Philip­pines “will con­tinue to grow strongly,” sup­ported by solid do­mes­tic de­mand and pub­lic in­vest­ment.

Re­forms in the lo­cal tax sys­tem and a deeper do­mes­tic debt mar­ket will also at­tract more pri­vate sec­tor in­vest­ment, in­clud­ing for­eign di­rect in­vest­ments.

Head­line in­fla­tion, how­ever, could breach the cen­tral bank’s 2- 4% tar­get range to reg­is­ter 4.2% this year be­fore eas­ing to 3.8% in 2019.

Con­tin­ued heavy im­por­ta­tion of cap­i­tal goods will likely drive the cur­rent ac­count bal­ance to deficit equiv­a­lent to 0.5% of gross do­mes­tic prod­uct this year and 0.6% in 2019 from 2017’s 0.4%.

More­over, un­em­ploy­ment will be the worst across much of Asia at 5.5% for this year and 2019, though down from 2017’s 5.7%.

En­sur­ing that eco­nomic growth lifts more Filipinos out of poverty is a pri­mary goal of the cur­rent ad­min­is­tra­tion, which tar­gets un­em­ploy­ment rate to drop to 4.7-5.3% this year and 4.35.3% in 2019 from 5.5% in 2016, as well as poverty in­ci­dence to fall to 17.3-19.3% this year from 2015’s 21.6%.

Mean­while, growth across emerg­ing mar­kets and de­vel­op­ing economies is seen to ac­cel­er­ate by 4.9% this year and 5.1% in 2019, com­ing from a 4.8% climb a year ago.

Ad­vanced economies are pro­jected to grow by 2.5% this year and 2.2% in 2019, from 2.3% in 2017.

IMF’s Mr. Yang flagged tight­en­ing moves by cen­tral banks abroad as a key risk for the Philip­pines, as this could trig­ger in­vest­ment out­flows and higher bor­row­ing costs.

“As ad­vanced economies are ex­pected to grow ‘faster than po­ten­tial’ in 2018 and 2019, some cen­tral banks in these economies have be­gun and will likely con­tinue to tighten mone­tary pol­icy which will lead to tighter global fi­nan­cial con­di­tions. This in turn could re­sult in cap­i­tal out­flows from some emerg­ing mar­ket economies,” the IMF of­fi­cial said.

“Thus, one of the main risks to the growth out­look for emerg­ing mar­ket economies such as the Philip­pines stem from tighter global fi­nan­cial con­di­tions.”

The US Fed­eral Re­serve is ex­pected to hike in­ter­est rates fur­ther this year af­ter rais­ing them by 25 ba­sis points in the March meet­ing of its Fed­eral Open Mar­kets Com­mit­tee.

Other ar­eas of con­cern in­clude in­ward-look­ing poli­cies in some ad­vanced coun­tries, trade tensions among ma­jor economies, and geopo­lit­i­cal events.

“How­ever, the Philip­pines is in a strong po­si­tion to man­age shocks to its econ­omy as it has am­ple for­eign re­serves and a low level of pub­lic debt,” Mr. Yang added.

Dol­lar re­serves to­talled $80.128 bil­lion in March, mark­ing a third straight month of de­cline though still pro­vid­ing a “very com­fort­able” buf­fer, ac­cord­ing to the Bangko Sen­tral ng Pilip­inas. The re­serves can cover 7.8 months worth of im­port pay­ments, above the three-month global stan­dard, though lower than the 8.2-month ra­tio logged in Fe­bru­ary.

Debts in­curred by the Philip­pine gov­ern­ment to­talled P6.652 tril­lion as of end- De­cem­ber to ac­count for 42.1% of the lo­cal econ­omy. Eco­nomic man­agers have said this share re­mains “man­age­able” and rel­a­tively low com­pared to the ra­tio for other Asian coun­tries.

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