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).

Addicted to migration?

By Felipe Salvosa II

It’s a quiet morning at the local arcade. The beauty parlor has just opened, but people are starting to fill it up. Not all of them are paying clients, though -- some have come to chat about the latest goings-on, probably on their way to the neighborhood courier/money transfer outlet or to the shop where there’s mobile phone “load.” Upstairs, the eatery selling lugaw, palabok, empanadas, budget rice meals, and a variety of viands is also starting to get busy, catering to people on their way to work.

This scene could be somewhere in Metro Manila, but it’s also in Blacktown in Western Sydney, home of the largest Filipino community in Australia. Where European settlers once took over from the aborigines, Filipinos are consolidating their own diaspora, which globally has reached some nine million.

Pinoy take-out at Blacktown City in western Sydney. Numbering 35,000, Pinoys are the biggest minority.

A 'demographic window' of opportunity

By Felipe Salvosa II

Is a large population a boon or a bane?

The debate has been going on for centuries. In the Philippines, it flares up whenever lawmakers take up bills proposing to control population growth.

In recent months, however, the government’s top economic managers -- echoed by a number of private-sector analysts -- have cited the advantages of the country’s demographic profile, changing the tone of the population debate.

In March 2012, Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco, Jr. told the Philippine Investment Forum that the Philippines would be the last major economy in Asia to enter the “demographic sweet spot,” and this would happen by 2015. In May, Finance Secretary Cesar V. Purisima said a huge working population was expected to accelerate economic growth.

The BSP chief pointed to the Philippines’ young population, which, at a median age of 22.2, is even younger than neighboring countries like Malaysia (25), Indonesia (27.8), and Vietnam (28.2).

OFWs fuel urban-rural gap (2007)

By Felipe Salvosa II

Money from overseas workers is fueling the divide between urban and rural areas with remittances tending to benefit the country’s affluent regions, leaving poorer regions behind and worsening inequality, according to a study.

And while overseas Filipino workers’ (OFW) remittances have contributed significantly to the economy’s growth, the study by the University of Santo Tomas (UST) confirmed the worrisome phenomenon of agricultural workers leaving the farms to join industries in more developed regions and wait for the opportunity to become OFWs themselves. 

The study, "Workers’ Remittances and Economic Growth in the Philippines" authored by economist Alvin P. Ang of the UST Social Research Center, found that the more OFWs sent per region, the lower the percentage of workers in the farm sector.