Philippines - Philippine economy seen to double by 2020

The Philippine economy may grow 80 per cent larger within nine years as anti-corruption efforts build momentum and translate into greater foreign direct investment inflows, according to DBS Group.

In a research titled "Asia 2020," the Singapore-based financial service group said that over the coming decade, economic growth will be respectable and trending toward 6 per cent.

Such growth will depend much "on policy and whether the large labor pool and resource endowment—which include gold, nickel and copper—can be effectively tapped upon," the paper said.

"We hold a cautiously optimistic view of the economy and expect reform to proceed at a moderate rate," DBS added. "By 2020, GDP will (in today’s dollars) likely be 80 per cent larger, and income levels 45 per cent higher than at present."

The group said that the Aquino administration has so far done a credible job in introducing reforms focused on fiscal discipline and public-private partnership (PPP) on infrastructure investments as well as population management and anti-corruption reforms.

Amid criticism that the government is not spending enough, the Palace has limited deficit-spending to 34.5 billion pesos (US$794 million) in the eight months to August, or about a seventh of the 228.1 billion pesos (US$5.25 billion) recorded in the same period of 2010.

Also, the Palace expects to auction off the first of big-ticket PPP projects before yearend.

"A new structure for project approvals and implementation is being established, which should complement the launch of PPP projects," DBS said. "Measures to counter corruption should raise investor confidence."

DBS noted that the savings rate has grown to 18 per cent from 11 per cent in 2004 adding that investment is beginning to follow the same path and that GDP should follow.

"In short, the reform momentum is building, and this should translate into greater FDI inflows and complement the rising domestic savings rate already apparent in the data," it said.

Further, DBS said the country’s young population could prove to be an advantage although the still-high birth rate remains a challenge, with an additional 19 million people seen within the next nine years.

"To some extent, resources have been spent in accommodating a rise in population at the expense of other investment, and this may have impeded GDP growth," DBS said.

Ronnel W. Domingo

Philippine Daily Inquirer

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