ADB sees 6% GDP growth for PHL in 2013, 2014

(Updated 3 p.m.) The Asian Development Bank (ADB) expects the Philippines' economy to sustain a strong growth of 6 percent in 2013 and 2014, slightly lower than the 6.6-percent growth it enjoyed in 2012. In its report “Asian Development Outlook 2013” released Tuesday, ADB said the 2013-2014 gross domestic product (GDP) will be supported by upbeat business and consumer sentiment, as well as robust fiscal spending. ADB added that “construction activity driven by the still strong demand for housing and office space” will boost economic growth. However, ADB's Country Director for the Philippines Neeraj Jain said the challenge for the government is to make the economic growth felt by the ordinary Filipinos, adding a strong GDP growth can only be felt with fundamental employment programs, especially in a country where job generation “remain[s] a key concern.” “A stronger industrial base is vital for increasing jobs, and will help make growth more inclusive and sustainable,” Jain said in a statement. “Continuous deployment of oversea workers masks the severity of the unemployment problem.” In the report, ADB said "(t)he challenge is to translate solid economic growth into poverty reduction by generating more and better jobs" According to the January 2013 Labor Force Survey of the National Statistics Office, unemployment rate is at 7.1 percent, slightly lower than the 7.2 percent in January 2012. Underemployment, on the other hand, rose to 20.9 percent from 18.8 percent. "Higher rates of economic growth over recent years have not made a serious dent in the employment problem in the Philippines," the ADB said. The bank said about 7 million Filipinos, or about 17 percent of the domestic labor force, have left the country to seek work, bringing the total number of Filipinos living abroad to over 10 million. Also, despite GDP growth, employment slowed down to 1.2 percent in 2012, with almost all jobs created by the services sector alone. The bank said the country needs to create jobs from the industrial/managing sector – where the Philippines has lagged compared to other countries – by pushing “policymakers to improve infrastructure and the business environment to encourage manufacturers to locate in the country.” GDP share in manufacturing went down to 22 percent in 2012 from 26 percent in 1990. Also, manufacturing only takes up 8.3 percent of total employment in 2012, compared to 16.4 percent in Malaysia, 14.7 percent in Thailand, 13.9 percent in Indonesia, and 13.8 percent in Vietnam. "A stronger industrial base, particularly in manufacturing, could generate a wide range of jobs," ADB said in their report. Improve manufacturing sector Despite growth, "(s)purring industrial development requires broad-based reform to address the long-standing challenges of under-provision of infrastructure, an unfriendly investment and business environment, and poor governance," the report said. Even with existing reforms such as liberal trade restrictions, simplified licensing system and sound financial system, the bank said "by themselves they may not be enough to attract substantial new manufacturing investment in the near term." "Targeted interventions aimed at manufacturers may be required. The challenge is to identify constraints on the development of particular industries and formulate policies to deploy against them. That requires considerable consultation with the industries concerned," ADB said. Strong macroeconomic fundamentals Jain noted though that the government's reforms and “prudent macroeconomic management” resulted in strong GDP growth. “The recent investment grade rating affirms the improved macroeconomic fundamentals and investment environment,” the director added, referring to the first ever ratings upgrade to investment grade for the Philippines, by Fitch Ratings. In 2012, the Philippines saw the economy grow 6.6 percent on back of growth in the services, trade, real estate and construction sectors. The ADB said the 2012 GDP is buoyed by robust private consumption, a rebound in government spending, and increased investment. Also, inflation eased to a five-year low of 3.2 percent, but is likely to go up to 3.6 percent in 2013 on increased consumption and an increase in excise taxes on alcohol and tobacco, ADB said.  — Marc Jayson Cayabyab/KBK/BM, GMA News