Reforms, solid macro conditions to ease risk of overheating – NEDA

MANILA, Philippines — The country’s solid macroeconomic conditions and ongoing reforms will ease the economy’s risk of overheating, the National Economic and Development Authority (NEDA) said.

In a statement, NEDA said worries about the imminent risks of overheating are “exaggerated,” stressing the country’s solid macroeconomic conditions and ongoing reforms make the economy primed for sustained and even higher growth.

“As we tread a high growth trajectory, risks are typically present on both domestic and external fronts,” Socioeconomic Planning Secretary and NEDA chief Ernesto Pernia said.

“Nevertheless, we remain vigilant in monitoring these developments. And we already have the platform to effectively address these concerns,” he said.

Earlier this week, the World Bank Group cited the Philippines as among the top three growth performers in the region, after Vietnam and China in 2017. It attributed the growth to the country’s strong exports which rose sharply in 2017.

It, however, said the Philippine economy is at risk of overheating.

“There are several domestic risks facing the Philippines, including increasing inflation and an overheating of the economy as well as high fiscal deficits,” said Birgit Hansl, World Bank lead economist and program leader for equitable growth, finance and institutions for Brunei, Malaysia, Philippines and Thailand. 

“External risks consist of greater policy uncertainty related to growing trade protectionism and increasingly inward-looking sentiments in several advanced and emerging economies, and potential market volatility from faster-than-expected US Federal Reserve rate normalization,” she added.

Pernia reiterated that reforms, which will aid the economy’s further growth, are gaining traction with the groundwork for change already initiated in 2017. Some of these reforms are focused on easing business transactions with the government, filling the infrastructure gaps, and improving both the quantity and quality of the human capital in the Philippines.

Among these reforms is Build Build Build, the massive infrastructure campaign of the Duterte administration.

At least 34 flagship projects of the administration are expected to roll out this year or early next year, according to NEDA.

In addition, NEDA is also pushing for the full implementation of Republic Act 10687, also known as the Unified Financial Assistance System for Tertiary Education (UniFAST) Act, which will expand access to higher education as the government continually invests in teacher training and other critical inputs to ensure the quality of education.

Moreover, Pernia said the government must also strictly enforce and monitor the Anti-Red Tape Act (ARTA), which is expected to reduce the unnecessary burden the government is imposing on the private sector.

“This is also the first time that we are seriously implementing measures to maximize our demographic dividend.  At this point, we want families to attain their desired family size while the government pours sufficient investments into programs helping children reach their full potential,” Pernia said.

“With the increase in physical and human capital, the economy can accommodate faster growth,” he added.