Lack of infra seen to hamper growth
MANILA, Philippines - The country’s lack of infrastructure will hamper growth prospects despite the robust economic growth, the Bank of the Philippine Islands (BPI) said.
In a report, the BPI said the Philippines’ apparent lack of world class infrastructure, coupled with the snail-paced improvements in capacity building may hamper its long-term prospects.”
The economy grew 7.6 percent in the first half of the year, among the fastest in the region. The level is also already higher than the government’s target of a six to seven percent expansion.
BPI noted that the country will have to work on improving its agriculture and manufacturing sectors if it wants to achieve inclusive growth, one which reaches the poor.
“Unless the Philippines can translate the abundance of opportunity to build capacity early on, a six-seven percent GDP growth may definitely be within reach but given that the growth remains pre-dominantly in the services sector, the potential to generate jobs and provide inclusive growth will be minimal,” the bank said.
“Should expansion fail to evolve into quality broad-based growth in agriculture and manufacturing, eight-nine percent growth will be elusive while inclusive growth may continue to be a pipe dream,” it said.
While domestic consumption continues to be the biggest driver of growth, BPI noted that perhaps being still heavily dependent on this is one of the country’s weaknesses.
“Growth remains heavily-dependent on consumption and investment linked-to-consumption, while being pre-dominantly in the services sector. Most importantly, gains have made little headway into capacity building and job creation,” the report said.
The biggest strength of the country, meanwhile, is its healthy external position that gives it buffer against volatilities brought about by the slowing global economy.
“International reserves remain sizeable and consistent current account surpluses are a bright spot in a world fearful of a Fed (US Federal Reserve) taper,” the report said.
The country’s gross international reserves topped $83 billion in September, while its current account remained in surplus in the first half of the year. This means the country has enough to pay for its imports and service its foreign debts.