MANILA, Philippines – Philippine economic growth this year may overshoot the government’s target of 5% to 6%, on strong domestic consumption and recovery of exports.
In a briefing Friday, November 23, local think tank Institute for Development and Econometric Analysis Inc. (IDEA) said strong domestic consumption and some recovery in the export sector will lead to a gross domestic product (GDP) growth of 5.4% to 6.5% in 2012.
With the high growth expectation, IDEA said Philippine growth may slow down in 2013 and 2014. It projected a growth of between 4.7% and 6% for next year, and 4.6% to 5.9% for 2014.
“Part of the decline [in 2013] is just base effects. [Growth last year was very low], at 3%. Just to illustrate, if you’re coming from 100 to 50, that’s a 50% decline. If you go back to 100, that’s a 100% increase,” IDEA board member Romeo Bernardo expalined.
“The economy will continue to chug along in 2013, maintaining at least 5% growth, on the back of traditional growth drivers – BPOs, tourism, finance on the supply side [and] remittance-driven consumption, increased government spending and non-negative exports on the demand side. But [it] needs more investments to sustain growth,” Bernardo said.
Threat to national interest?
Bernando said however that strong growth has consequences.
One of the side effects of strong growth is a stronger peso, which could reduce the competitiveness of the country’s Business Process Outsourcing (BPO) industry and dampen the spending of overseas Filipino workers’ families.
IDEA board member Calixto Chikiamco told Rappler at the sidelines of the event that the appreciation of the peso is already “a threat to national interest.” IDEA expects the foreign exchange rate to average around P43 to the US dollar next year.
“It’s a threat to national interest, but I don’t know if the government is aware of it. It seems to be clueless that if it goes to beyond 40 to the 30 level, it will wipe out exporters. You will threaten your consumer industries because even the OFWs will have fewer pesos to spend, [and] it will facilitate smuggling because imports are cheaper. So it’s a threat to national interest but is the government doing anything about it? I don’t know,” Chikiamco said.
Apart from the appreciation of the peso, uncertainty surrounding specific industries, such as the mining and quarrying sector, will make the next two years difficult for firms.
Bernardo said that until concerns about the Aquino government’s mining policy – Executive Order 79 – are resolved, it will be difficult for mining companies to grow their businesses further.
He also gave a bearish outlook for the telecommunications and agriculture sectors.
He said the telcos business “will not be as exciting as it used to be.”
The long saga of the Comprehensive Agrarian Reform Program, which has weighed on the agriculture sector, must end so commercial farming can begin, he added. – Rappler.com