For the country to maintain its growth momentum, the government should start investing in both hard and soft infrastructure.
Brian Murray, AIA Group Limited chief economist, gave this advice during an economic briefing last Friday.
“I see there are already plans and projects set by the government for hard infrastructure like the roads under the PPP (Public-Private Partnership), but I think the government should also start investing on the soft infrastructure like education and health,” said Murray.
The government must be able to implement the projects in the next five years or lose the country’s competitive edge especially with the Asean integration happening next year, he said.
Investments to improve education and health systems must also be put in place to stir a more inclusive growth.
“I think education is the best way to help Filipinos earning low income to go higher to mid-income and then to high income,” he said.
Murray said the Philippines is in the best position for growth with more stable fundamentals and stability based on high savings and not on debt.
“The economy is stable, unleveraged and balanced that’s not reliant on credit, consumer expenses and export alone,” Murray said.
He noted the country’s first quarter GDP (gross domestic product) growth of 5.8 percent, and an expected 6.4 GDP growth at the end of the year.
The country’s inflation rate is picking up but not threatening because it could just be caused by the high consumer activity caused by the typhoon.
“The Central Bank has been very proactive and balance in managing the economy so the Philippines is very stable,” Murray said.
He also believed on the resiliency of the country’s economy amid the two greatest threats of the global economy today — the Middle East conflict and the Russia-Ukraine crisis.
“These are low probability but high impact events. These affect oil prices which major economies are dependent including the Eurozone, the US and also the Philippines,” he said.
emerging countries
He, however, said that emerging countries in Asia including the Philippines will register higher growth than developed countries which include the European countries, the US and Japan.
“The GDP (gross domestic product) growth and the economic fundamentals here (emerging Asia) are stronger than in the developed countries. Yes there will be good growth globally but not that great in the developed countries,” said Murray.
The United States of America registered a 2.9 percent contraction in the first quarter and annual growth is seen to only grow by two percent which is lower than the consensus rate of three percent.
Inflation rate is at 2.2 percent while interest rate is expected to be at the present level.
Japan, on the other hand, posted positive first quarter performance with growth of 7.6 percent investment spending and 2.3 percent consumer spending.
“The GDP growth is projected at 1.5 percent but inflation rate is high at 3.3 percent, which is high above their target of only two percent.”
The Eurozone, meanwhile, is starting to register growth but very minimal at only 0.2 percent GDP in the first quarter.
“It’s positive but very low. The two economies, Germany and Spain grew higher with 0.8 percent growth for Germany and 0.5 percent for Spain,” he said.