‘PH to be upper-middle income country by 2022’
Credit to Author: ANNA LEAH E. GONZALES| Date: Fri, 26 Apr 2019 16:30:34 +0000
THE Philippines is expected to continue posting strong growth in the next few years and poised to become an upper-middle income country by 2022 and a trillion-dollar economy by 2032, according to an IHS Markit report.
In its “Philippines Tiger Economy Still Set for Dynamic Growth” report released on Friday, the London-based research firm maintained its 6-percent economic growth forecast for the country for 2019 and 2020, a slowdown from last year’s 6.2-percent expansion.
These projections were lower than the World Bank’s revised forecast of 6.4 percent for this year and 6.5 percent for 2020 and the Asian Development Bank’s 6.4 percent.
Despite this, IHS Markit chief economist for Asia-Pacific Rajiv Biswas said the country’s growth outlook for both the medium and long term continues to be positive.
“The Philippines economy has recorded a strong macroeconomic performance since the global financial crisis [of 2008], with the total size of national GDP (gross domestic product) having risen from $200 billion in 2010 to around $330 billion by 2018,” he said.
“The near-term outlook is for continued strong economic expansion, with GDP growth of around 6 percent per year over 2019 and 2020,” the economist added.
Key growth engines include strong inflows of remittances from overseas Filipino workers, high growth of the information technology-business process outsourcing sector, strong electronics industry exports, and the government’s massive infrastructure program.
The report also said the country was poised to be one of the upper middle-income countries by 2022 due to the economic reforms the government implemented.
“By 2022, the Philippines is projected to reach per capita GDP exceeding $4,000 per person, which would push it into the ranks of upper-middle income developing countries. Rapidly growing household incomes in major cities, led by Manila, will drive the growth of the domestic consumer market,” Biswas explained.
“The Duterte administration has been pressing ahead with a number of significant economic reforms during the early years of its term in office, including a major push to improve public infrastructure and the Comprehensive Tax Reform Program, which is expected to boost revenue growth,” he noted.
“With a total population estimated at 107 million in 2018, the Philippines is also one of the most populous countries in Southeast Asia, and as per capita GDP levels rise above the upper middle-income threshold, this will create an increasingly substantial consumer market that will support the growth of the nation’s manufacturing, services and construction industries,” Biswas said.
The Philippines is also projected to be a trillion-dollar economy by 2032, according to the economist.
“The Philippines is on the threshold of becoming an upper middle-income economy, which will help to drive strong growth in the size of the domestic consumer market
and foster industrial development,” Biswas said.
“The long-term outlook for the Philippines economy is very positive, with total GDP projected to double from $330 billion in 2018 to $672 billion by 2026. The Philippines is forecast to become one of Asia’s trillion-US-dollar economies by 2032, with per capita GDP reaching around $8,200,” he added.
Challenges
Biswas, however, said that while outlook remains positive, policymakers needed to tackle some economic development challenges, including the country’s high poverty rate.
The Philippine Statistics Authority earlier reported that the country’s poverty incidence hit 21 percent in the first half of 2018.
The weak business climate is also a concern.
“Another major hurdle to economic development is the relatively weak business climate, with the Philippines ranked at just 124th out of 190 countries in the World Bank’s Ease of Doing Business ranking for 2019,” Biswas said.
“The comparatively low ranking for the business climate of the Philippines compared to other large Southeast Asian developing countries is reflected in relatively weak foreign direct investment inflows,” he added.
The Bangko Sentral ng Pilipinas had reported that net FDI inflows dropped by 38.2 percent to $609 million in January from $986 million a year ago.
“The Duterte administration’s ‘Build Build Build’ program does recognize that decades of weak infrastructure investment have contributed to the weak business climate in the Philippines, and is therefore giving a high priority to narrowing the infrastructure gap by 2022,” Biswas said.
He also said that, aside from these, the country’s trade deficit, which hit $2.79 billion in February, highlighted the need to increase competitiveness in order to make the Philippines an investment hub for multinationals to boost exports of goods and services.
Over the next decade, sustained rapid economic development would result in a significant reduction in poverty levels and accelerate progress in the country, he added.
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