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THE
Philippines has a good chance of hurdling high oil
prices and the projected contraction of the United
States economy in the medium term, according to the
World Bank (WB), which released on Thursday its latest
East Asia and Pacific Update.
The
report projected the
Philippines
will post a gross domestic product (GDP) of 6.7 percent
in 2007 and 6.2 percent in 2008.
According to the bank’s lead regional economist Milan
Brahmbhatt, also the lead author of the update, high oil
prices and the weak US economy will certainly be
disastrous for East Asian economies, and they will grow
lower than 5 percent to 6 percent.
Brahmbhatt noted that oil prices will continue to be
within the $90- per-barrel level “for a longer period of
time” as against the projection of some economists oil
prices would fall within $70 per barrel next year.
WB
Philippines senior economist Vera Songwe agreed and said
that in the Philippines, which now has stronger economic
fundamentals, inflation caused by high oil prices will
be contained within government targets of 3 percent to 4
percent.
She said
high domestic consumption brought about by strong
overseas Filipino workers’ remittances and public
spending will continue to fuel the Philippines’ economic
growth in 2007.
“We see
very strong growth in 2007, around 6.7 percent this year
and 6.2 percent next year. [The lower GDP projection for
2008 is] only because of rising oil prices and the
contraction of the United States economy. But, what is
important is that the country’s growth is within 6
percent. We hope this will be sustained,” said Songwe.
The main
challenges for the Philippines, Songwe said, are
remaining an attractive country for investments,
bringing down capital requirements in putting up
businesses, bringing down energy costs and increasing
infrastructure.
Songwe
said recent efforts of government to simplify business
processes, the privatization of power assets, and the
efforts to achieve completion of all planned
infrastructure projects are a move in the right
direction for achieving sustained economic growth.
She also
said the country need not worry about the current
political noise created by the impeachment complaints
against President Arroyo, the recent Batasan bombing and
the Glorietta blast last month since investors have
become more mature and confident about the Philippines’
economic fundamentals.
Songwe
said that while the market immediately reacted to the
October blast in Makati City, but with little
contraction seen in stock prices, there was also an
immediate recovery. She said investors only saw the
blast as a “benign incident” that would not make a huge
negative impact on the economy.
“High
GDP growth, reduced public debt, a balance-of-payment
surplus, falling interest rates, recovering financial
markets and high remittance levels by overseas Filipino
workers have combined to bring about the highest
economic growth achieved by the Philippines in 20
years,” said Songwe.
“The
sustained good performance on tax administration remains
critical to sustaining this positive environment,” she
added.
In a
statement, the bank said the country registered the
highest growth among Southeast Asian countries and will
continue to perform well similar to its East Asian
counterparts.
“The
Philippines has demonstrated its ability to perform on a
par with or better than its regional neighbors on the
economic front in recent years. The challenge moving
forward is to accelerate the pace of reducing poverty,
delivering social services to the poor, and attracting
more job-creating investments,” said WB acting country
director Maryse Gautier.
While
poverty levels have declined overall, the bank said the
Philippines has also become more urbanized. The bank
noted that only 38 percent of the population in rural
areas in 2004 remain poor compared with 62 percent in
1984.
The bank
said labor moved out of agriculture largely through
urban migration. One-dollar-a-day poverty declined to
13.5 percent in 2004; the Gini coefficient of income
inequality increased from 0.41 to 0.44.
Personal
consumption, benefiting from growing remittances,
expanded by 6 percent. In contrast with previous years,
government consumption increased as a share of GDP.
Unemployment fell to 7.8 percent from 8.1 percent in
2006, and underemployment fell to 22 percent from 23.5
percent in 2006, according to the July round of the
labor force survey.
The
consolidated public-sector deficit was eliminated in
2006, and a P32-billion consolidated public-sector
surplus, about 1 percent of GDP, was recorded in the
first half of 2007. The national government deficit
through September fell to P40 billion versus a targeted
P54 billion, and appears on track to remain below the
annual target of P63 billion (0.9 percent of GDP).
Public expenditure has increased in real terms.
The
update is a six-monthly report on the region’s economic
and social health that finds that growth in emerging
East Asia is expected to exceed 8 percent in 2007 for a
second year in a row and to moderate only slightly in
2008.
“East
Asian economies are likely to remain robust in 2008
despite growing concerns about the US subprime crisis
and increasing global oil prices,” the East Asia and
Pacific Update stated.
The bank
also said although East Asian exports to the US have
already slowed, more buoyant investment and consumption
in China and other countries have allowed growth to
remain strong and even pick up this year. |
