US economist hails PH success story

Visiting American economist Nouriel Roubini hailed the Philippines as an “economic success,” citing the country’s potential to move toward a higher growth rate of at least 7 percent a year.

But Roubini said more structural reforms were needed to ensure “sustainable” and “cohesive” growth beyond President Aquino’s term in 2016.

In an investment forum organized by First Metro Investment Corp., Roubini was mostly upbeat on the Philippines, which he believed deserved a sovereign investment-grade rating for its fiscal reforms.

“There’s renewed interest among investors, recognizing changes in the policy of the country such as in fiscal policy,” said the economist, who shot to fame as the “prophet of doom” who predicted the collapse of the US housing market that led to a global economic crunch in 2008-2009.

Roubini said the success story of the Philippines was a result of a sophisticated private sector, and strong governance and reform policies.

Anemic global recovery

His favorable view on the Philippines came amid an anemic global economic recovery. He predicted a global growth of only 3 percent, more cautious than the International Monetary Fund’s forecast of 3.5 percent.

Roubini noted that the US political system was dysfunctional and that this political gridlock would likely be a continuing source of noise for the economy.

While risks of a euro zone breakup had been averted, he said there were remaining risks on peripheral countries and in the case of China, risks of hard landing could not be ruled out for next year.

Rich human capital

As for the Philippines, he said the country had the potential to achieve a higher growth rate given its rich human capital—a large pool of young, literate and English-speaking citizenry from which the country could derive dividends.

Roubini cited the significant amount of remittances from overseas workers, the rising middle class and consumer-oriented society.

He also noted the country’s rich natural resources, which could help boost the agriculture sector and build a manufacturing base, and ongoing diversification in economic activity.

Outsourcing, tourism

While outsourcing accounted for large part of the economy, tourism can play a bigger role, he said.

The American economist said mining could be a more significant contributor to the local economy and a magnet for investments if more projects were allowed while being mindful of environmental issues.

Roubini recognized the country’s “sound” monetary policy and commitment to inflation—targeting, saying that inflation could stay at 3 percent or below this year, aided by a strong peso.

Strong democracy

Also working in the country’s favor was a strong democracy, a much-improved governance framework and a popular leader, Roubini said.

On the other hand, Roubini enumerated a number of constraints to growth in the Philippines, including the potential impact of rapid peso appreciation on the competitiveness of exporters and the business process outsourcing.

Another challenge was a prolonged period of low interest rates that could lead to an asset bubble, although he said this was not a concern for now.

Another key challenge was the need to reduce reliance on consumption and deepen capital formation, the opposite of the needed economic restructuring in China, Roubini said.

After 2016, what?

He also acknowledged the need to increase the government’s tax take, improve the modest flow of foreign direct investment, improve per capita income, address pervasive rural poverty and be better prepared for natural disasters.

Further institution-building is also deemed necessary. “The fight against corruption has been successful but much more needs to be done,” Roubini said, citing “oligopoly” in some sectors.

Greater openness to foreign investment, he said, was one structural reform critical to preventing the concentration of economic power.

“Question is what will happen after 2016. People are going to be asking, ‘Is it just that?” Roubini said.

But the economist said there was a good chance that in 2016, Filipinos would vote for leaders who have the same reform agenda as that of the current administration given the gains being reaped currently.

Nonetheless, he said the country must assure potential investors of the sustainability of the ongoing reforms.

Infrastructure

Roubini said the Philippines would have to invest more in infrastructure and human capital to attract more investments. He said public spending on healthcare and education should increase to enhance human capital.

But he said that the challenges were already being addressed by the government, and this should eventually convince credit rating firms and the international investment community that the positive momentum would be sustained.

via Inquirer.net

PH economy seen to expand 6.5%

“All of us will be impressed,” President Aquino said Tuesday of the report on the full-year economic growth rate in 2012, which the government planning agency is set to release Thursday.

Still exuberant over renewed investors’ confidence in the country, the President echoed pronouncements by officials of the National Economic and Development Authority (Neda) that the growth of the economy will surpass the official target of 5-6 percent for the past year.

Mr. Aquino, however, declined to prematurely disclose figures of the fourth quarter and full year growth in 2012.

“All of us will be impressed,” Mr. Aquino said on the sidelines of the Neda’s 40th anniversary celebration in Pasig City when asked about full-year growth prospects for 2012.

Socioeconomic Planning Secretary Arsenio Balisacan also said economic growth in 2012 was expected to exceed the target range of 5 to 6 percent.

“The first three quarters averaged 6.5 percent, so exceeding 6 percent for the whole year is very easy,” Balisacan said, noting that it was “possible” the economy grew by 6.5 percent in the fourth quarter.

The fourth quarter usually benefits from Christmas spending, Balisacan said.

Combined with very little “shocks” and the minimal effect of flooding on agriculture and other sectors, the Philippines is in for a robust fourth quarter performance.

The economy grew 6.3 percent in the first quarter of 2012, followed by 6 percent and 7.1 percent in the second and third quarters, respectively.

Impressive

Hitting a growth rate of more than 6 percent for the full year would be “impressive” considering the target range, the persistent uncertainty in the global community, and the challenges faced by the country’s neighbors, said Balisacan, who is also the Neda director general.

The Philippines, like most of its neighbors in Southeast Asia, has stayed resilient in the face of the European debt crisis and weak growth in key trading partners such as the United States, with strong private and public spending offsetting weaker exports.

The economy needs to become more diversified to complement consumption with exports and investment, Balisacan said.

“We have a lot of problems in infrastructure from transport to power, ports, airports. We are paying very strong attention to all these infrastructure issues. This year and next year, there’s a strong focus on infrastructure development,” he added.

Even up to mid-August of last year, there were some doubts that the economy would perform well. “People were saying we can only grow at 4 to 5 percent. We have to have more confidence in ourselves,” Balisacan said.

Spreading opportunities

The Philippines aims to chalk up an average of 7-8 percent annual growth from 2010 to 2016 in order to curb poverty and spread income growth opportunities to the countryside as part of its thrust for “inclusive growth.”

In his speech at the Neda, the President, fresh from his attendance at the World Economic Forum in Davos, Switzerland, continued to rave about resurgent investors’ confidence in the country that he said was an offshoot of sound economic policies.

“The good news we shared with the businessmen and world leaders we met with during the recently concluded World Economic Forum are results of your efforts to align the work of agencies: From our economic growth averaging 6.5 percent for the first three quarters of 2012, to the fact that the previous year’s average inflation rate was kept within our targets, to the developments we have made in our three priority sectors, namely, agriculture, tourism, and infrastructure,” he said.

Inclusive growth

Citing government data, Mr. Aquino said the economy was “growing” and this was proof of the “work we have put in.”

“The data also remind us of the need to ensure that this growth is sustainable and broad-based, so that we can sooner achieve our goal of inclusive growth. This is why we are continuing our efforts to level the playing field, to weed out corruption, and to step up our competitiveness in the global market,” he added.

In spontaneous remarks after his speech, the President said he held meetings with CEOs in Davos, and recounted how eager they were to expand their business in the country after decades of operation.

“There were companies that were over a hundred years in the Philippines; the youngest had logged in 66 years. Modesty aside, they were very eager to expand their business here. And then those who have no business here are scrambling to bring a delegation here to take a look at the opportunities,” he said.

Turned upside down

Relatedly, Mr. Aquino said a large business delegation called on him with a strong pitch for its products and services, years after he had met them and short of begged them to invest in the country during a visit by his mother, then President Corazon C. Aquino.

“Now, they’re asking us to patronize their products. It’s as if the world has turned upside down,” he said, drawing applause.

Facing reporters later, the President stood by the country’s economic growth following a survey by the Malaysian credit-watcher RAM Rating Services showing the Philippines as the laggard among the region’s major economies.

“I think the Neda will be answering it on our behalf. It’s a new organization to me. (It’s the) first time I’ve heard of it. I haven’t had the occasion to look at it. But I think that even they will agree that our performance vis-à-vis their own economy is very, shall we say, very much in our favor,” he said.

Then responding to a survey by the Legatum Institute in which the Philippines ranked 67th  among 144 countries in its Prosperity Index, Mr. Aquino said: “I’m sure the one conducting that is also human. Just like in the expression, beauty is in the eye of the beholder…. Those data are a little obscure to me. I’m trying to compare apples to apples.”

via Inquirer.net