Making Philippine economic growth inclusive in the context of regional integration

Recent Philippine economic performance has been phenomenal, driven by a dominant services sector. Last year, the country’s gross domestic product (GDP) grew by 7.2 percent, outpacing the previous year despite the devastation caused by Typhoon “Haiyan” and other natural disasters. Services, which account for nearly 60 percent of GDP, grew by 7.1 percent; industry expanded by 9.5 percent. Agriculture, meanwhile, managed to grow by 1.1 percent. On the demand side, growth in household and government consumption slowed down to 5.6 percent and 8.6 percent, respectively, while capital formation jumped by 18.2 percent. For 2014, our think tank, the Philippine Institute for Development Studies, forecasts Philippine GDP to grow by 6.6 percent (Navarro and Llanto 2012).

Compared with neighboring countries, the Philippines equaled or outpaced China in the first two quarters of 2013, and grew faster than Indonesia, Malaysia, Thailand, and Vietnam in all four quarters of last year.

There has been a lot of good news in the Philippines recently. Better governance as shown, for instance, by improved fiscal health, has earned successive sovereign credit rating upgrades for a country once known as Asia’s basket case. One year after getting investment-grade status, the Philippines was again given an upgrade by S&P, which said the latest action was due to its belief that “ongoing reforms to address shortcomings in structural, administrative, institutional, and governance areas will endure beyond the current administration” (Batino and Yap 2014).

Nouriel Roubini: Philippines ‘an economic success’

By Felipe Salvosa II

Economist Nouriel Roubini, who foresaw the US recession that stemmed from a busted housing market, yesterday turned cheerleader for the Philippines, heaping praises on the country’s fiscal and monetary policies and declaring the erstwhile sick man of Asia “an economic success.”
 
Mr. Roubini, in Manila for the Philippine Investment Summit 2013, said the country was ready to be fully integrated into the regional economy under the planned ASEAN Economic Community.
 
“The economic fundamentals of the country have vastly improved. And you see the results in terms of overall growth, low inflation, low fiscal deficits, low stock of public debt, positive external balance, low external debt, the performance of equity markets and bond markets and of the currency,” he told an exclusive press roundtable.
 
“It’s already reflected markedly in the economic success of the country and therefore this country is competitive. It’s flexible, it has a diversified economy, can compete in a wide variety of sectors. [I]ntegration and opening, the furthering of it, can only be beneficial to the country over time.”

Photo from First Metro

The ASEAN Economic Community

By Felipe Salvosa II

In two years, the Association of Southeast Asian Nations (ASEAN) will reach a milestone—perhaps the most significant since the establishment of ASEAN itself nearly half a century ago. The 10-member regional group will become an “ASEAN Community” by 2015, standing on three pillars: the ASEAN Political and Security Community, the ASEAN Economic Community or AEC, and the ASEAN Socio-Cultural Community.

As it is, ASEAN is already an economic powerhouse, with a combined economic output of $2.2 trillion and a population in excess of 600 million people. Together with neighbors China, Japan, and South Korea, regional trade accounts for a quarter of world trade.

AEC will be the culmination of years of efforts to integrate the regional economy. The goal is to transform ASEAN into a single market and production base. ASEAN is envisioned as a regional economy with efficient production networks and high quality cross-border services such as air travel and healthcare run by a mobile and skilled workforce. Under the AEC vision, goods, investments, and capital flow freely, but growth is inclusive, with small and medium enterprises thriving despite competition.

Full article at the PIDS website.