ADB cites need for more jobs, investments, infrastructure to grow PHL economy

Government spending and private consumption are the two main drivers to propel the Philippine economy this year, but the real challenges to economic growth are more investments to generate jobs and address the gaps in infrastructure development, the Asian Development Bank (ADB) reported on Tuesday.

 

In the latest Asian Development Outlook 2015, the Manila-based lender noted the Philippines will grow by 6.4 percent this year, as measured by the gross domestic product (GDP) and by 6.3 percent in 2016.

 

The ADB forecast is lower against the 7 to 8 percent growth range the Philippine government has been expecting for the economy this year and the next.

 

“Factors that powered private consumption in 2014 – growth in employment, modest inflation, and higher inflows of remittances – are expected to continue to support solid growth this year,” ADB country director Richard Bolt told reporters during a news conference in Mandaluyong City.

 

Last year, the Philippine GDP grew by 6.1 percent, maintaining its position as the second fastest growing economy in Asia next to China. 

 

While the economic outlook is bright, Bolt noted the need to stimulate employment and pursue efforts to address gaps in infrastructure development.

 

"Investment has improved in the Philippines, but still lower than what has been observed with regional peers," he said. 

 

"A key constraint to growth stems from low investment in infrastructure. The Philippines ranks 95 out of 144 countries in the quality of infrastructure in the World Economic Forum’s Global Competitiveness Report 2014–2015," he added.

 

Jobs-creating foreign direct investments (FDI) soared to an all-time high of $6.2 billion in 2014 from $3.7 billion in 2013. 

 

In terms of percentage-to-GDP, FDI inflows accounted for slightly above 2 percent of GDP last year.

 

However, in terms of the same ratio, Indonesia registered 2.5 percent, with Thailand and Malaysia recording above 3 percent, according to ADB's latest report.

 

Citing the Aquino administration's public-private partnership (PPP) program, Bolt noted investments in infrastructure is advancing in the Philippines, over and above the government target to raise public spending to 4 percent to GDP in 2015 and 5 percent of GDP in 2016 – from 2 percent of GDP over the past decade.

 

"From 11 projects in 2010, the Philippines now has 61 potential projects covering highways, railways, light rails, mass transit, classrooms and hospitals," he said.

 

"Continued progress in the PPP will be needed to help further raise infrastructure investments," he added.

 

The ADB report noted that 2.6 million Filipinos are jobless, half of them 15 to 25 years old, while 6.5 million were underemployed despite an improvement in the latest jobs data.

 

The latest labor force survey (LFS) showed the jobless rate at 6.6 percent in January 2015, compared with 7.5 percent a year earlier, while the total underemployment rate was estimated at 17.5 percent from 19.5 percent.

 

Education reforms, particularly the K-12 program, are keys to improving prospects in the labor market, Bolt said.

 

"This is a very positive trend. It's cost efficient to continue to the next administration and it's so fundamental to improve the quality of education to improve the labor force," he added. – VS, GMA News