MANILA, Philippines - Despite strong public infrastructure spending, the Philippines still needs to double its efforts in attracting more foreign investments to grow the economy by seven to nine percent, a Hongkong and Shanghai Banking Corp. Ltd. economist said.
“Unless we get a really sharp improvement in the investment climate, the long term growth will sort of be around five to six percent,†Frederic Neumann, HSBC’s co-head of Asian economic research, said in a briefing yesterday.
“(This is below the) seven to nine percent that the Philippines could achieve if it is to raise its game on investments,†he said.
Neumann said the country should take advantage of this “historic opportunity†wherein interest rates are at a record low, and thus, funding costs are less for investors.
“If there is one thing this economy lacks, it’s investments... especially in infrastructure,†Neumann said.
The Philippines, he said, ranks the lowest out of 11 economies in terms of the quality of transportation, communications, electricity, and water infrastructure based on a recent HSBC index.
The Asian Infrastructure Measure lumped the Philippines with Indonesia, Vietnam, Thailand and India as those whose improvements in their infrastructure have very little impact in their gross domestic product (GDP).
These countries scored below China, Malaysia and Sri Lanka whose governments have been ramping up infrastructure spending, and also far from the ranks of Singapore, Korea and Hong Kong, which boasts of a very well-developed infrastructure system.
“There is such an overwhelming need for infrastructure in the Philippines,†Neumann said.
“Fortunately, the government has started to roll out the PPPs (public-private partnership projects)... but we should not rely on PPPs alone,†he added.
The economist explained there are some projects which the government should do on their own, while some should be left for the private sector to undertake.
Public spending last year grew six percent to P1.88 trillion from P1.78 trillion in 2012 but this was below the government’s P1.98-trillion program.
For this year, government expenditures including those for infrastructure are expected to reach P2.284 trillion, about 17.5 percent of GDP.
Increasing investments in infrastructure will allow other sectors such as manufacturing to expand and better support economic growth, Neumann said.
The HSBC economist said the bank remains optimistic on Philippine growth this year as it expects the number to settle between 6.8 and seven percent.