PHL economy needs to evolve from consumerism, say business executives

The private sector is quite upbeat over the Philippine economy, but notes the need to move from a consumption-driven market as a way of fueling further expansion, business executives said.

 

The Philippine story has revolved on consumption as the economy thrives on robust overseas Filipino remittances and service sector, said Bach Johann Sebastian, JG Summit Holdings Inc. SVP and chief strategy officer, during a panel discussion at the Philippine Investment Forum in Makati City.

 

"Consumption-led growth is great, companies have benefitted from that, but it cannot sustain trajectory of Philippine growth," he said.

 

However, these factors driving the economy, Sebastian noted, are getting constrained by issues in infrastructure. "You need to create new facets with new values, which would have to come from other sectors," he said.

 

"But it's very important for both the government and private sector to make the right investments, especially in the countryside," he added.

 

Last year, the Philippines posted a 7.2 percent jump in gross domestic product (GDP) from the 6.8 percent in 2012, making the country Asia's second fastest growing economy next to China.

 

In the second quarter of 2014, the Philippine economy expanded by 6.4 percent, matching that of Malaysia as the second fastest in Asia next to China, from 5.6 percent in the first quarter and 7.9 percent a year earlier.

 

Future growth depends heavily on investments from both government and private sector, Jollibee Foods Corp. CFO Ysmael Baysa said in the same event.

 

"Investments, particularly in the countryside and also in agriculture, because that's where bulk of the labor force is," he said.

 

ASEAN integration

Baysa sees some economic push coming from the Association of Southeast Asian Nations (ASEAN) integration next year, with low tariffs propelling the free flow of goods.

 

"It's possible that we will have lower inflation because of better sourcing of raw materials, with the lower tariff especially in food," the Jollibee official said.

 

"In the Philippines, the biggest part of our inflation basket is food. With the greater circulation and exchange of goods, especially agricultural products, food prices would stabilize further," he added.

 

By 2015, the ASEAN Economic Community (AEC) sets in motion the creation of a single market spanning the 10-nation bloc.

 

ASEAN groups Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam.

 

In September, inflation eased to 4.4 percent from 4.9 percent in August, but faster than the 2.7 percent a year earlier.

 

"Investments really have to flow into these sectors and productive capacity has to be created to support any future growth," Sebastian said.

 

Apart from sources of growth, the Philippines has to address infrastructure to be able to move forward, SM Investments Corp. CFO Jose Sio said.

 

"We believe in the future of the Philippines. Along the way, we also believe there are growing pains of a developing economy," he said.

 

The country's growth will be crucial next year given the several crises expected, including the power shortage crisis in summer and in transportation, the SM official noted.

 

"We are now seeing what is happening in our country. You go to the airport, to the LRT... Look at our power crisis. We need government and private sector to work on these things," he said.

 

"The Philippines has a future, but it is up to us, the private sector, and government to really recognize and do something about the problem. Otherwise, we will be left behind by other countries," Sio noted. – VS, GMA News