IMF sees 6.5% growth for Philippine economy

The International Monetary Fund (IMF) has projected the country’s gross domestic product (GDP) growth at 6.5 percent in 2014 and year-end inflation to moderate to 4 percent.
The domestic economy posted a 7.2 percent growth in 2013 on account of the robust domestic demand coupled with higher public spending and private investments.
“With potential growth estimated at 6.25 percent, the positive output gap is expected to widen slightly in 2014 as the fiscal stimulus from reconstruction activities related to super typhoon Yolanda further supports growth, the IMF said its latest report on the Philippine economy.
The IMF sees higher imports to meet reconstruction needs expected to narrow the current account surplus to 3.2555 percent of GDP.
“Considering the reforms undertaken, GDP growth is projected to converge to 6 percent, with inflation remaining within the new lower 3±1 percent target band.”

While this envisaged growth path is faster than what was achieved during previous decades, realizing the Philippines’ full potential for rapid, sustained and inclusive growth calls for further reducing bottlenecks to investment and formal sector employment that may be discouraging broader-based business activities, the IMF said.
The report noted that a diversified production structure is more conducive to delivering more durable, employment-intensive growth.
“This would help achieve significant progress in lowering unemployment and poverty rates, thereby reducing the number of people who may be vulnerable to natural disasters and other shocks. The challenge is to continue implementing policies that deliver high quality, sustainable growth.”
The IMF said that the Philippines’ growth remained resilient, the external sector was strong, inflation was subdued, and the banking sector performed well, aided by prudent BSP oversight and regulatory standards.
The IMF supports the BSP-proposed amendments to the BSP charter authorizing, among others, higher capitalization, exemption from income tax, the issuance of its own bills and enhancing its supervisory powers.
“In the fiscal area, we support the government’s dual objectives of narrowing infrastructure gaps and mobilizing additional revenue.”
“Increasing the national government deficit to 2 percent of GDP in 2014, together with continued modest revenue gains from stronger tax administration, would accommodate sizable reconstruction spending needs under ‘build back better” standards arising from the recent earthquake and typhoon,” the report noted.
On the structural policy front, the IMF recommended further reforms to create a more enabling business environment and to generate additional employment.
“Successfully executing PPPs and public capital spending projects would relieve infrastructure bottlenecks and help catalyze private investment.”
The IMF said that identifying PPPs of national importance through amendments to the Build-Operate-Transfer law could mitigate regulatory uncertainty for investors, and further opening energy generation and distribution to competition would have downstream benefits for other sectors through lower input costs.
Narrowing the negative list for foreign investment and scaling back generous perpetual income tax holidays that favor incumbents would support greater market contestability, the report said.
“Reducing internal transport costs including by opening domestic shipping to foreign competition under the Cabotage law amendment would support agri-business and lower food prices.”
“Resolving uncertainties with land titles and use, expanding access to formal-sector credit by SMEs and micro-firms, reducing skill mismatches through better targeted education and apprenticeships would support job creation,” the report added.

Population and social statistics key to monitoring Philippine progress

Reliable and timely population and social statistics are crucial in monitoring the Phillippines’ progress in meeting development targets under the Millennium Development Goals (MDGs) and estimating the impact of disasters, according to the National Economic and Development Authority.
 
“The demand for official statistics at the national and local levels will grow as the government continues to rely on statistical data and hard evidence for crafting its policy-decisions and actions,” said Economic Planning Sec. Arsenio Balisacan.
Balisacan expressed support for enhancing government’s capacity to provide high-quality statistical information. He noted the greater awareness on the potential of new data sources for generating reliable and useful statistics.

“TheMDGs include verifiable targets that need to be monitored. This has promoted dialogue among policymakers, civil society and statisticians not only in the design of national goals but also in the preparation of regular monitoring reports using statistics,” he said.

Balisacan noted that there has been an increase in the demand for and the production of local-level statistics to support the Aquino government’s poverty reduction programs and projects such as the DSWD’s Pantawid Program and PhilHealth’s National Health Insurance Program.

He also underscored the importance of more timely and relevant statistics in minimizing the impact of natural disasters.

“This need for data cannot be overemphasized in the Philippines after the recent devastation by Typhoon Yolanda. As recovery efforts continue, we need better information so that we can identify the most vulnerable groups in need of ongoing support,” said Balisacan.
He added that statistics are instrumental in designing appropriate support for rebuilding affected communities and people’s lives.
“They also enable us to monitor the effectiveness of the assistance the government is providing and point us in the right direction for making appropriate adjustments,” said Balisacan.

The discussion on sustainable development goals (SDGs) and the post-2015 development agenda has also sparked debates on the availability of reliable population and social statistics.
 
“For statistical systems to remain relevant and equipped to meet the increasing demands for information, statistical capacity building must be treated as a high priority issue that merits attention at the highest levels,” Balisacan added.

Government-private sector collaboration to promote agri competitiveness

The National Economic and Development Authority (NEDA) has stressed the need for the government to enhance collaboration with the private sector to promote agricultural competitiveness.
 
“As Southeast Asian economies collectively gear up for regional integration in 2015, it is important to understand how public-private partnership schemes could facilitate the modernization of the agriculture sector and the revitalization of rural economies,” said Economic Planning Sec. Arsenio Balisacan.
 
Citing the lessons learned from the 2013 APAP forum, Balisacan explained that “one of the critical constraints to agricultural growth is the absence or the lack of efficient infrastructure system, particularly transport, power supply, and communication infrastructure.”
 
Balisacan said this effectively increases the cost of doing business, which prevents small farmers from taking advantage of the opportunities in the rapidly growing areas, urbanized centers and foreign markets.
 
He emphasized the crucial need of increasing productivity and production, expanding markets, improving participation and value-adding activities, and building disaster resilience in enhancing agricultural competitiveness.
 
“However, the government cannot do this alone,” said Balisacan  as he underscored that the Updated Philippine Development Plan 2011-2016 incorporates enhancing public-private partnership for agricultural development, especially for infrastructure and value chain development and management.
 
“The interventions include irrigation infrastructure, food supply chain and post-harvest services, production centers for various farm inputs, fish-farming infrastructure, and market and trading centers, among others,” said Balisacan.
 
He added that private sector investment, particularly in research, has been devoted to seed acquisition, exchange, distribution, and improvement of genetic stocks of crops, forest species, livestock, and fish using conventional and biotechnology applications.
 
“Investments may also be made in the production and distribution of improved seed and livestock, production of fertilizers and pesticides, and the development of more efficient management practices to optimize crop production,” said Balisacan.