AN AGENCY of the United Nations (UN) has raised its economic growth forecast for the Philippines, but expects the country to be outpaced by other developing Asian economies this year.
The UN Economic and Social Commission for Asia and the Pacific (ESCAP) improved its gross domestic product (GDP) growth forecast for the Philippines to 5.2% from the 4.6% announced last December, citing better-than-expected merchandise export volumes.
This was in line with a higher growth projection for developing Asian economies at 7.3% from last December’s forecast of 7%.
Optimistic
The UN agency was more optimistic than three multilateral agencies -- the World Bank, International Monetary Fund, and the Asian Development Bank -- which all expect only 5% growth for the Philippines.
The government had set an official growth target of 7%-8% for 2011, but the interagency Development Budget Coordination Committee had said this would like be missed amid continuing civil unrest in the Arab world and the aftermath of Japan’s earthquake and tsunami last March. Last year, global recovery pushed GDP growth to a three-decade-high 7.3%.
ESCAP expects inflation in the Philippines to remain within the Bangko Sentral ng Pilipinas’ target of 3%-5%, "although in some months it could breach the 5% mark." The National Statistics Office yesterday reported inflation as hitting a one-year-high 4.5% in April, driven primarily by rising fuel prices.
This, in turn, drove the central bank’s Monetary Board to raise key policy rates by 25 basis points for the second time this year to 4.5% for overnight borrowing and 6.5% for overnight lending.
Data from ESCAP’s "Economic and Social Survey of Asia and the Pacific," released yesterday, showed that Philippine growth would be below the 5.5% forecast for Southeast Asia, as the country would be outpaced by neighbors Laos (8.3%), East Timor (8.2%), Indonesia (6.5%), Vietnam (6.2%) and Cambodia (6.2%).
The Philippines will also be outpaced by China (9.5%), India (8.7%), Bangladesh (6.4%) and Kazakhstan (6.2%).
Developing countries with slower projected growth rates were Malaysia and Singapore (5%), Thailand and South Korea (4.5%), and Pakistan (2.8%).
Banking on exports
Daniel Jeongdae Lee, associate economic affairs officer of ESCAP, attributed the improved projections for the Philippines and developing Asian economies to better merchandise export performance.
"Initially, we thought economic slowdowns in the United States and Europe would lead to severe export slowdowns in the Asia-Pacific. But export decline in this region turned out to be less severe than expected," he said in a telephone interview.
ESCAP said Asia and the Pacific would continue to be the global economy’s driver in 2011, with a projected growth of 7.3% for developing economies, which covers 37 countries.
Developed economies in the region, composed of Japan, Australia, and New Zealand were expected to grow by combined 1.6%.
"The region’s large developing economies [China and India] continue to power ahead," the ESCAP report added.
The UN agency allayed fears of a severe economic downturn in the wake of disasters that hit Japan. "The 2011 earthquakes and tsunami in Japan will also have wide repercussions, though smaller than might have been expected initially," it said.
If Japan’s economic growth were to slow down by 1%, ESCAP said, the Philippines would record a corresponding drop of only 0.09 percentage point.
ESCAP said oil price hikes present "undesirable scenarios," likely shaving 0.27 percentage point off GDP growth for the Philippines, and adding 0.39 percentage point to the inflation rate if oil prices were to rise $10 from the baseline $105 per barrel.
With a $25/bbl price hike, GDP growth would go down by 0.75 percentage point while inflation would go up by 1.09 percentage points, the report said.
‘Acute concerns’
Reacting to the survey findings, Fernando T. Aldaba, economist from Ateneo de Manila University, said in a forum on the ESCAP report at Ortigas Center yesterday: "Despite almost a decade of moderate economic growth, poverty reduction has been painstakingly slow."
Renaud Meyer, country director of the UN Development Programme in the Philippines, noted that Philippine economic growth is "growth that increases poverty," since it benefits only a few industries, regions and sectors.
"It is growth without development. It is growth that is far from inclusive," he said in the forum.
The number of poor Filipinos increased to 23.1 million in 2009 from 22.2 million in 2006, according to the National Statistical Coordination Board.
Growth has eased the job situation in the region, "but there are still acute concerns about the quality of jobs and the vulnerability of workers," the report said.
Hence, it called for increased social protection measures.
"As labor markets grow, policy makers need to focus more on quality jobs and incomes. A post-crisis macroeconomic framework should seek full employment for men and women as a core policy goal, besides economic growth targets, inflation and sustainable public finances. As countries in the region reconsider their fiscal policies and their sustainability, it is critical to incorporate a basic social floor," it said.
The report noted that the Philippines was considering putting up unemployment insurance schemes.
Relying on demand at home
The ESCAP report said "In the medium-term, Asia-Pacific exporting economies will need to generate more aggregate demand in the region to sustain their dynamism," with developed economies reducing demand "as they unwind the global imbalances by restraining debt-fueled consumption."
"With over 950 million people living on less than $1.25 a day, the region has lot of room for expanding consumption. Consumption rates can be enhanced by generating more household income, by such means as raising wages, enhancing employment opportunities or expanding social protection programs," it added.
The report made a host of recommendations on extending regional connectivity; expanding intraregional trade and investment; improving transport links, information and communications technology, and energy cooperation; and enhancing infrastructure, among others.
"With the rise of emerging countries in the region as the growth poles of the world economy, South-South, triangular and regional cooperation have become viable strategies for development. An increasing number of countries, such as China, India, Malaysia, the Russian Federation, Singapore and Thailand have well-developed programs for assisting other developing countries, especially their neighboring least developed countries. Such initiatives should be further promoted and extended," the report said.
