Philippine economy far from overheating — BSP exec

(The Philippine Star) - December 23, 2018 - 12:00am

MANILA, Philippines — The Philippine economy is poised to sustain strong growth in the coming years, debunking claims it faces risks of overheating, Bangko Sentral ng Pilipinas Deputy Governor Diwa Guinigundo said.

“Reforms have helped propelled the economy to an impressive streak of 79 consecutive quarters of uninterrupted growth. That means 19 years and three quarters since the first quarter of 1999. More-over, the structural reforms have been translated into higher potential output for the economy,” Guinigundo said during the Pilipinas Conference organized by independent think tank Stratbase ADR Institute in Makati City.

 “Our estimates show that potential output growth has been rising, averaging six percent for the period 2010 to 2017. So the talk about the large output gap is without basis. Our output gap is either a small positive or a small negative. So, the issues about overheating is quite misplaced,” Guinigundo said.

Thought leaders from government, the academe and industry examined the Philippine economic outlook for 2019 during the conference.

“A balance between strategic engagement and strategic retreat is imperative for managing the economy and steering the country’s development. In short, state-market synergy is key to address the primordial concern of a developing nation like the Philippines,” said Stratbase president Dindo Manhit.

“Poverty reduction and labor expansion should be prioritized to demonstrate the presence of inclusive growth. The volatile growth of the manufacturing sector in relation with the service sector reveals an indeterminate improvement for labor. In turn, poverty reduction cannot simply be addressed through dole-outs. Reducing poverty undeniably necessitates both political and economic reforms,” he said.

Calixto Chikiamco, president of Foundation for Economic Freedom, said the country failed to achieve its target of reducing poverty incidence to 17.2 percent by 2015 and instead hit 21.5 percent.

 “The slowdown in overseas Filipino workers remittance growth, innovations to business process outsourcing sector, import growth far outpacing export growth, and declining government international reserves are among the challenges of rising current account and trade deficit,” Chikiamco said.

Dr. Raul Fabella, professor emeritus of University of the Philippines School of Economics, compared economic growth as the “new normal versus old normal.”

Fabella said that in the second year of President Duterte’s administration, growth in manufacturing slowed down and expressed hope this won’t persist as manufacturing is linked to poverty reduction.

“Inclusion as poverty reduction fares better when manufacturing growth exceeds services growth in low-income countries,” Fabella said.

George Barcelon, chairman of the Philippine Chamber of Commerce and Industry, said the government should act consistent with the law to entice conglomerates.

“What the country needs is to uplift the SMEs. Ease of doing business, power facilities can help SMEs to propel the growth of countries. Government should focus on both education and skills training, which is crucial for economic growth and what causes us for being uncompetitive,” Barcelon said.

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