PH economy in sweet spot, says Bangko Sentral exec Increased productivity, investments help sustain country’s growth

The country is in a sweet spot because the economy is growing rapidly and inflation rate is well within target levels.

This was the assessment of Diwa Guinigundo, deputy governor of Bangko Sentral ng Pilipinas, on the country’s economy during  last Friday’s Economic Review and Business Forum organized by the Cebu Business Club.

“We are moving toward a higher growth potential. In the past, we fear that if we go beyond 3.5 percent growth, the economy would overheat. But now we are seeing a higher potential. There are four main underlying reasons for this,” Guinigundo said.

One, he said, is that the country has showed improved productivity both in capital and labor.

Based on their data, the Total Factor Productivity from 2010 to the first quarter of 2014 is 2.52, a big improvement from the 1.77 points in 2008 to 2009.
The economy has also sustained economic efficiency with more investments coming in the country now.

“The robust labor market dynamics is also a big factor with more of the population entering the labor force by 2015 who are more educated and more trainable,” he said.

The fourth underlying factor is the country reaching a demographic sweet spot where majority of the population enters the age of 15 to 65 years old. This is the age group that works and earns income, according to Guinigundo.

INCOME EARNERS

“There are more income earners in the country than dependents. That will fuel more growth in the economy as more people can now afford higher lifestyle and higher consumer spending,” he said.

As of today, the median age level for those who work and earn is at 22.2 years old.

These factors contributed to the sustained growth in the economy, he said.

The BSP is  projecting a Gross Domestic Product of 6.5 percent to 7.5 percent this year.

“There are two things that we see as risks to the economy which is what we are also carefully monitoring and preparing for. One is that the global economy continues to be uncertain. And, second is the many changes in fiscal linkages and policies among different countries as a result of the recent economic crisis,” said Guinigundo.

Guinigundo also cited the positive figures for the first half of the year as one of the reasons for his optimism in the economy.

1st HALF GROWTH

Growth for the first half of 2014 was 6.4 percent fueled by private consumption, net exports, industry particularly manufacturing and services.

Manufacturing contributed 10.8 percent during the first half of 2014.

Guinigundo said they expect an upbeat investment outlook with net foreign direct investments of $3.5 billion as of first half of this year, approved investments by the Board of Investments in the same period was valued at P110 billion.

Other growth factors include the still bullish sentiments of the business and the consumers and public spending on track.

“Government has targeted to increase public spending in infrastructure. 3.5 percent of GDP shall be spent for infrastructure this year, 4 percent next year and 5.1 percent in 2016,” he said.
natural calamities

Higher inflation rate at 4.6 percent as of third quarter this year is the effect of typhoon and natural calamities that hit major food producing areas in the country and the port congestions which Guinigundo said the government is already solving.

“Government is now easing port congestions to address supply-side constraints and avoid inflation rate to go higher,” he said.

“Aside from that the government is also now addressing weather-related disturbances like declaration of price freeze to temper inflation pressures and rice importations through government to government agreement with Thailand and Vietnam to supply additional 500 thousand metric tons by October,” he said.

 

 

TAGS: Philippine economy