Phl needs to boost exports – HSBC
The Philippines is no longer the “sick man” of Asia having experienced rapid economic growth over the past six years, but the country needs to boost the competitiveness of the export sector, according to British banking giant HSBC.
In a research note, HSBC economist Noelan Arbis said the Philippines has outperformed its regional peers in recent years after being the “sick man” of Asia for most of the 2000s.
He noted, however, private construction has deteriorated in recent quarters as the government embarked on a massive infrastructure build-up program through the Build Build Build scheme.
“We still see warnings signs for the Philippine economy in the near term,” Arbis said.
He explained the country could not sustain its rapid growth on investments alone.
“We believe it needs to develop a more competitive export industry for the future,” the economist said.
According to Arbis, services remain the primary driver of the economy, but the bulk of the services sector consists of relatively lowskilled and less productive activities.
Furthermore, the Philippine exports many of its services to other countries, but these services have limited links with the domestic economy in areas such as agriculture and manufacturing.
Economic managers penned a GDP growth of between seven and eight percent for this year, while the Bangko Sentral ng Pilipinas (BSP) has set a medium term inflation target of two to four percent from 2018 to 2020.
Arbis said the BSP would likely raise benchmark rates by 25 basis points next month and by another 25 basis points next year.
The central bank has kept an accommodative stance to support the growing economy by keeping interest rates steady for the past three years. It last raised interest rates by 25 basis points in September 2014.
“The recipe behind the recent improvement is well known, including social and economic reforms and a robust domestic consumption story. But greater investment has been the key difference between the country’s rapid growth in recent years and its laggard pace in the past,” he said.