The Philippine economy was able to post growth rates of seven percent for the past five consecutive quarters despite the weak global environment outperforming more advanced economies in Asia.
This strong economic expansion of the Philippines however has yet to make a significant impact on the country’s poverty and employment picture. Critics have dubbed this as a “jobless growth.”
“The strong macroeconomic fundamentals did not remain unnoticed. As a result, the country has managed to increase its competitiveness rankings and receive investment grade status from credit-rating agencies,” National Economic and Development Authority director general Arsenio Balisacan said during his year-end briefing for 2013.
“However, our experience of rapid growth is still short. The challenge is to sustain it and improve the economy’s capacity to generate remunerative jobs,” he admitted.
The full-year gross domestic product (GDP) growth rate for 2013 has yet to be announced. But as of the first three quarters of the previous year, the Philippine economy already expanded by 7.4 percent, faster than the 6.7 percent increase in the same period in 2012.
“Taking into consideration developments in the Philippine economy, including those on the external, monetary, and fiscal fronts, we expect GDP growth to hit the upper limit of our growth target (of 6 percent to 7 percent) for 2013,” Balisacan said.
“Without all these crises, we could have achieved 7.3 percent to 7.5 percent growth (in 2013),” he added, referring to calamities that hit the country in the previous year such as super typhoon Yolanda.
JOBS AND POVERTY CHALLENGE
According to the latest report of the National Statistics Office, the number of jobless Filipinos actually declined in October despite the occurrence of several natural calamities in the second half of 2013.
The October round of the Labor Force Survey showed, the country’s unemployment rate improved to 6.5 percent from the 6.8 percent registered a year ago.
In absolute terms, the number of unemployed persons fell to 2.602 million from the 2.763 million jobless Filipinos in October last year.
The employment picture improved even as typhoon Santi hit Central Luzon and several areas in the island and as a magnitude 7.2 earthquake hit parts of Central Visayas.
“The latest round of Labor Force Survey shows that although employment figures improved a bit in October, there is still a need to sustain efforts that facilitate the substantial creation of decent and quality employment,” Balisacan said.
“Also, the recent disasters experienced in Visayas confirm that we need to have a strong disaster risk-management program to mitigate the impact of weather disturbances on employment, particularly in agriculture where almost a third of our workers are,” he added.
The NEDA chief said the problem of quality employment is closely linked with the country’s longstanding problem of high poverty incidence.
The National Statistical Coordination Board announced late last year that a quarter of the country’s population still suffered from poverty in 2012 despite the 6.8 percent economic growth registered during the said year.
According to the 2012 Full Year Official Poverty Statistics, the country’s poverty incidence in 2012 was 25.2 percent, slightly lower than the 26.3 percent poverty rate in 2009.
However, due to the increase in the country’s population, the magnitude of the poor increased in 2012 and is estimated at 23.75 million, up from the 23.3 million in 2009.
“These twin problems of poverty and unemployment require more than just five quarters of impressive economic growth,” Balisacan said.
“Structural transformation is necessary, that is, to maneuver the economy from one that is household consumption-driven, fuelled by remittances, to one that is increasingly investment-led and employment-oriented,” he added.
The NEDA chief said the revival of manufacturing and the creation of new drivers of growth must be coupled with investment in human capital and innovations and the development of logistics and infrastructure.
“These will not only drive us to a higher growth trajectory but will also create high-quality employment opportunities and substantially reduce poverty,” he said.
Public construction is expected to significantly contribute to the country’s economic growth this year as the government works on the immediate- and short-term needs in areas affected by super typhoon Yolanda.
The Aquino administration expects the economy to expand by 6.5 to 7.5 percent for 2014, higher than the growth target of 6 to 7 percent last year.
“Although losses in agriculture resulting from Yolanda devastation is expected to reduce growth in the first quarter, reconstruction efforts are presumed to contribute to growth, particularly the rebuilding of shelter and other public and private infrastructure in the affected areas,” Balisacan said.
Cid Terosa, economist at the University of Asia and the Pacific, said that for 2014, he expects that the Philippine economy will expand between 6.8 percent to 7.3 percent.
His forecast is well within the government’s full-year target range.
“The main drivers will be domestic consumption demand, investment spending particularly by government spending on infrastructure and rehabilitation of areas hit by calamities, and exports due to the weakening of the peso,” Terosa said.
Terosa said the downside risks include higher inflation rates, interest rates, and budget deficit.
“Developments abroad will figure prominently, particularly the economic recovery of the USA, China, and Euro zone countries,” Terosa said.
Meanwhile, UP economist Benjamin Diokno said he expects the expansion of the Philippine economy to slow down this year from his forecast of 6.9 percent growth for the full-year of 2013.
“Even before the recent natural calamities, the Philippine economy has shown signs of slowing down,” Diokno said.
“For this year, GDP growth will be in the neighborhood of six percent, with public construction as the major source of growth,” he added.
The former budget secretary said the mining sector has great potential, if all existing uncertainties are removed.
“The world economy will remain weak, though the US will register stronger recovery,” Diokno said.
“A weak peso (and) a strong US dollar will be good for the domestic economy. It will result in higher household consumption, due to higher peso value of OFW remittances,” he added.
As for the country’s jobs picture, Diokno said the unemployment rate in the country will remain above seven percent this year.
“With slower growth, rapid population expansion, and the continuing impact of the 2013 calamities, poverty will deepen,” Diokno said.
In its 2013 Year-end Update, the United Nations Economic and Social Commission for Asia and the Pacific (UN ESCAP) said it expects the Philippine economy to expand by 6.7 percent in 2014.
The regional development arm of the UN said the prospects in the Philippines are positive in 2014, despite the losses as result of super typhoon Yolanda.
However, the agency said the Philippines’ economic growth rate could be cut by as much as 1.3 percentage points this year due to the effects of the tapering of the quantitative easing program of the US Fed.
“Due to the importance of the United States economy for the region, there will be significant implications of the major policy developments there in 2014 of ‘tapering’ and budget cuts,” the ESCAP report said.
“ESCAP analysis suggests that under a worst-case scenario, the effects of capital volatility due to “tapering” could cut GDP growth in the most affected countries in the region — Malaysia, the Philippines, the Russian Federation, and Thailand — by up to 1.2 to 1.3 percentage points in 2014,” it added.