Philippines Seen to Grow 1.4% in 2009, 3.1% in 2010
The Philippines Quarterly Update says continuing reforms to improve infrastructure, investment climate, and public finances can ensure higher growth in a post-global crisis environment
MANILA, NOVEMBER 4, 2009— The Philippines avoided a recession this year due to renewed consumer spending as well as timely monetary and fiscal stimuli introduced by the government. With an improving outlook on the global economy, the Philippines is poised to grow 1.4 percent in 2009 and 3.1 percent in 2010, notwithstanding the impacts of Typhoons Ondoy (Ketsana) and Pepeng (Parma).
These are among the highlights of the Philippines Quarterly Update (PQU) released simultaneously today with the East Asia and the Pacific Economic Update at the Asian Institute of Management in Makati City.
"Remittances are staying strong. Government consumption and public construction will continue to benefit from the national government's spending in the remaining months of 2009. So, based on new data, we believe the government growth forecast for 2009 to be entirely feasible," said World Bank Country Director Bert Hofman.
Eric Le Borgne, World Bank Senior economist in the Philippines, said that the export and the corporate sectors are showing signs of recovery. Exports to developed countries like the United States and Germany have improved since August, he said. "While SMEs, especially those which are export-oriented, are still reeling from the crisis, the corporate sector focusing on the domestic market is showing improved profitability. With financial markets also on the rebound, banks are able to turn around losses experienced in the last quarter of 2008," explained Mr. Le Borgne.
The property sector, said Mr. Le Borgne, remained strong owing to the continuing demand for condominiums and houses from expatriate Filipinos as well as office spaces from the bourgeoning business process outsourcing industry.
With the theme Towards an Inclusive Recovery, the PQU said that the BPO industry will emerge strong from the global financial crisis. The PQU explains that the global recession intensified the need for companies to review their cost structures, operating processes, and value-added chains. This will lead to a renewed wave of outsourcing among sectors that experienced large disruptions (e.g., banking). The financial sector has been one of the quickest to react from the crisis: a large number of banks are already significantly expanding their presence in the Philippines.
"The global BPO sector is strategically looking for a back up to India, and the Philippines seems to have established itself as the preferred choice given comparable cost, language and technical skills, thereby firmly establishing its relatively new industry on the global map," says the PQU.
The PQU suggests that the Philippine economy can grow more closely to its potential if structural bottlenecks, including inadequate infrastructure particularly in transport and energy, a weak investment climate, and historically weak public finances are addressed. It says that the post-global recession external environment facing the developing countries is likely to be less favorable.
The PQU says, "Achieving stronger growth in the less hospitable post-crisis environment—one that would allow the country to resume convergence with the more advanced countries in the East Asia Pacific Region— will depend on determined implementation of reforms to improve the business environment, education and infrastructure, enabling companies to move closer to the technological frontier, as well as maintaining sound public finances."
The PQU says that the adverse impacts of the global financial crisis on the social sector show signs of easing. As the economy started to recover, "green shoots" emerged in the labor market. The share of wage and salaried workers increased in July compared to April 2009, with a large decline in the number of workers in the informal sector. Hunger incidence also recently receded from its level during the height of the food and global financial crises, although the recent typhoons may have caused renewed duress.
To determine the extent of damages and losses caused by the typhoons, the government—together with the World Bank and other development partners (including United Nations, Asian Development Bank, and European Commission)—is conducting a post-disaster needs assessment (PDNA) covering various sectors including the social sectors (education, health, urban housing, informal settlements, and social protection), the productive sectors (agriculture and irrigation, fisheries, and enterprises), infrastructure (water supply and sanitation, flood control, transport, energy, communications); and economic impacts (macro and fiscal impacts, livelihood and poverty).
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