YEARENDER: Phl economy on track to full recovery – NEDA

MANILA, Philippines - After three consecutive quarters of robust growth, the Philippine economy now appears en route to a full recovery this year from a lackluster showing in 2011.

The country’s chief economic planner, National Economic and Development Authority (NEDA) director general Arsenio M. Balisacan, said he expects gross domestic product (GDP) growth to surpass the target range of five to six percent in 2012.

GDP expanded at a two-year high of 7.1 percent in the third quarter, pushing the nine-month figure to 6.5 percent. In 2011, growth registered at a relatively feeble 3.7 percent compared with a rapid 7.6 percent clip in 2010, the fastest in three decades.

“We posted the fastest economic growth within the ASEAN region. We are well on our way to surpassing our growth target of five to six percent this year and this economic expansion continues to be broad-based, as almost all sectors posted higher year-on-year growth rates,” Balisacan said.

In the third quarter, Indonesia came in second in terms of GDP growth with 6.2 percent, followed by Malaysia (5.2 percent), Vietnam (4.7 percent), Thailand (three percent) and Singapore (0.3 percent).

“As you can see, our efforts at good governance are beginning to bear fruit. But we know that our task is far from over,” Balisacan noted.

He pointed out that for the economy to really get off the ground, it must grow by at least the same rate consistently for the next two decades.

For example, Balisacan said for the Philippines to hike real per capita income two-fold in 15 years, it must grow 6.7 percent annually, on the average, for the next 15 years.

“My battlecry is between six to seven, and seven to eight percent growth rates for the next 20 years, for example, to catch up with Thailand. If not, we will be overtaken by Vietnam and Cambodia,” he said.

But the NEDA chief lamented that poverty reduction in the country has been slow and lagging, as the economy had not experienced sustained high growth over a long period.

The Philippines must also generate high quality employment, which can help address poverty. “Manufacturing is a crucial part of the transition,” Balisacan said.

From 2000 to 2009, the proportion of poor Filipinos had remained constant instead of decreased despite the continuous economic growth at the time. “This is why we term this period as our ‘lost decade’,” the NEDA chief said.

In addition, he said the economy suffers from high income inequality, which indicates that economic gains have not been broadly distributed across the different sectors of the population. Opportunities remain unequal, in terms of access to health and education services, market infrastructure and the like.

The socio-economic planning head also said inclusive growth represents a paradigm shift for reducing poverty. It contrasts with the terms “exclusive growth” and “trickle-down.”

Inclusive growth includes the poor and marginalized groups in the growth process. This presents a better chance for the poor to benefit from growth. 

Exclusive growth, on the other hand, means that the benefits of growth are confined to a few.

“In trickle-down growth, the poor also benefit from growth, but only after some time. Given the current volatile situation in the global market and even the physical environment, it would be very difficult to sustain rapid growth long enough for trickle down to happen,” Balisacan told a business forum last month.

The Philippine Development Plan (PDP) enumerates a number of strategies to achieve inclusive growth. Most of these are needed for rapid and sustained growth. For inclusive growth, these strategies have to be targeted to benefit the poor and the marginalized.

First is massive infrastructure development not just in the cities, but making sure that the rural and marginalized areas are connected to highly-urbanized centers.

Second is human development and human capital formation. To ensure that productive sectors would have the pool of skills they would need for a growing economy and, at the same time, improve the capacities of the poor to benefit from growth.

Third is direct poverty relief. There are those who cannot be directly involved in the growth process but government has to ensure their basic right to live decent lives. For them, government is implementing targeted poverty reduction programs.

Lastly is employment generation, where government can provide temporary employment to selected individuals in implementing public works, like rehabilitation of infrastructure in disaster-affected areas, construction of other small infrastructure, and other activities. At the same time that the infrastructure is built, the poor are able to earn incomes and learn new skills.