Aiming for higher growth

The outlook for the Philippines was generally optimistic, with economic growth seen at 4.2 percent this year and 5 percent in 2013. In the Philippines Quarterly Update, released the other day by the World Bank, the country’s “strong macroeconomic fundamentals” and political stability were also cited, together with “a popular government that is seen by many as strongly committed to improving governance and reducing poverty.”

The positive assessments, however, should not lull the Aquino administration into complacency. The principal message in the World Bank report is the “urgent” need for reforms if the government wants to achieve higher growth and improve the lives of more poor Filipinos. In particular, the WB noted that the government must strengthen public finances and overall competitiveness if it wants to achieve rapid and sustained annual economic growth of about five percent.

The World Bank pointed out that the road to reforms needed the support of other stakeholders, including policymakers, civil society and the private sector. Among the reforms being pushed by the WB are those in taxation and public financial management. The WB noted the need to reduce the cost of doing business and strengthen regulatory capacity. It also echoed the call of investors for better infrastructure and service delivery. While the WB sees better employment prospects this year, with 100,000 new jobs expected to be generated, workers’ skills need to be improved, the bank pointed out.

The WB warned that continuing global economic woes could affect jobs in the Philippines’ export sector, particularly in electronics. The global slowdown could also affect deployment of overseas Filipino workers.

Reforms are needed to accelerate economic growth, the WB stressed, particularly because over 25 percent of the population still lives below the poverty line while about 50 percent remains vulnerable to poverty. “Inequality has worsened in the last decade,” the WB noted, while the middle class remains small, accounting for only about 15 percent of the population. The Aquino administration is on the right track, the World Bank observed. But it can and must do more.