Philippine Economy Surging But Job Creation Lags

Philippine Economy Surging But Job Creation Lags

ADB sharply upgraded its 2013 GDP growth forecast for the Philippines, but warns that growth has yet to generate new jobs
Oct 04, 2013 (Menafn - M2 PRESSWIRE via COMTEX) --Booming investment and consumption continue to underpin an economic renaissance
in the Philippines, but robust growth has yet to generate sizeable numbers of new jobs, says a new Asian Development Bank (ADB) report.
"The economy is riding high on the back of hefty domestic demand and investment, low inflation and interest rates, buoyant remittance flows,
and upbeat business sentiment," said Neeraj Jain, ADB's Country Director for the Philippines. "However the good times are not translating into
jobs with over a quarter of all Filipino workers still unemployed or underemployed."
In an update of its flagship annual economic publication, , released today, ADB sharply upgraded its 2013 gross domestic product (GDP) growth
forecast to 7.0% from 6.0 % in April. For 2014, growth is now estimated at 6.1%, from the previous projection of 5.9%. In 2012, growth reached
6.8%.
In the first half of 2013, the economy surged 7.6%, supported by spending linked to elections, strong investment in construction, and a further
expansion of the services sector, which accounted for half the GDP growth. The performance was, however, tempered by a fall in export volumes.
Looking ahead, the same drivers will continue to fuel economic activity, supported by the benign inflation and interest rate environment, ample
liquidity, and a rise in government spending. At the same time the authorities will need to keep a close eye on credit conditions with the
possibility of a central bank tightening of monetary policy next year. Strong domestic demand and a weaker peso may put some upward pressure
on inflation in 2014.
Recent financial jitters sparked by expectations of a wind-back of the United States Federal Reserve's quantitative easing operations have raised
concerns about the impact of an exodus of foreign capital from emerging markets. The Philippines is well placed to withstand any volatility with
its current account firmly in surplus and high foreign exchange reserves. Its external debt as a share of GDP is also on a downtrend and the
banking sector is healthy, with strong capital adequacy ratios and low levels of non-performing loans.
The challenge for the economy, however, remains job creation, the report says. Employment generation over the past two years has fallen short of
the official goal of adding 1 million new jobs a year needed to absorb new entrants into the labor force and to put a dent in joblessness. Currently
about 3 million people are unemployed and another 7.3 million don't have enough work.
Services cannot absorb all job seekers, and with employment in manufacturing declining over the past two decades, there is pressure to
reinvigorate the sector so more work can be created for semi- or unskilled workers. This requires sustained efforts to clear obstacles to direct
investment, to upgrade infrastructure, and to make improvements to governance. The government must also step up work with the private sector
to develop plans for the development of niche market industries in manufacturing and agribusiness on which the Philippines could capitalize.

PH population to increase by 85%, good for

economy
The Philippine population will grow by 85 percent in the next six decades, according to a forecast of a United Kingdom-based
international accounting and finance firm.
The country will experience the largest population increase in the Southeast Asian region in that period, with an additional 82
million people, said the Institute of Chartered Accountants in England and Wales (ICAEW) in a December report, Economic
Insight: Southeast Asia.
This increase should boost growth and safeguard the regions competitiveness at a time when the working-age population begins
to shrink in China and is already doing so in Japan as well as in some European countries, the ICAEW analysis said.
The ICAEW, however, does not see the boom in the Philippine population as a bane for the economy.
The increase will make the country an attractive base for manufacturers, it said.
But the firm cautioned policymakers that raising output in a countrys overall production couldnt rely on population growth
alone.
Productivity is crucial as well, and one way to raise productivity is by moving up the value chain from labor-intensive
manufacturing to high value-added goods as well as business and financial services, it said.
The Philippine population as of May 2010 stood at 92.34 million, according to the National Statistics Office.
Boom and boost
The Philippines and Malaysia are the only countries in Southeast Asia that will see a population boom in the next 60 years,
according to the report.
It said Thailand would see its population peak in about two decades, adding only about

5 percent to its number of inhabitants over this period.

The ICAEW projections were based on each countrys policies and programs on family planning and immigration.
For the entire Southeast Asian region, the ICAEW projected population to rise by around a quarter from the current 600 million
to a maximum of about 760 million in 2057.

Philippine Economy: Current Overview

Economic growth has averaged 5% since President Macapagal-Arroyo took office in 2001.

Macapagal-Arroyo averted a fiscal crisis by pushing for new revenue measures and, until recently,
tightening expenditures. Declining fiscal deficits, tapering debt and debt service ratios, and increased
spending on infrastructure and social services bolstered optimism over Philippine economic prospects.

Although the general macroeconomic outlook improved significantly in recent years, the economy still
faces several long-term challenges. The Philippines must maintain the reform momentum in order to
catch up with regional competitors, improve employment opportunities, and alleviate poverty. The
Philippines will need still higher, sustained growth to make progress in alleviating poverty, given its high
population growth and unequal distribution of income.

The Philippine economy grew at its fastest pace in three decades in 2007 with real GDP growth exceeding
7%, but growth slowed to 4.5% in 2008 as a result of the world financial crisis. High government
spending, a relatively small trade sector, a resilient service sector, and large remittances from the four- to
five-million Filipinos who work abroad have helped cushion the economy from the current financial
crisis.

As of 2008: Inflation Rate 9.3%, Public Debt 56.5% of GDP, Unemployment Rate 7.4%

Exports: semiconductors and electronic products, transport equipment, garments, copper

products, petroleum products, coconut oil, fruits.
Imports: electronic products, mineral fuels, machinery and transport equipment, iron and
steel, textile fabrics, grains, chemicals, plastic

Philippines' Aquino expresses 'regret' over

HK deaths
Philippine President Benigno Aquino expressed regret over a Manila hostage crisis
that left eight Hong Kong residents dead in 2010, but the Chinese territory's leader
said Tuesday his words were not enough.
Aquino made the comments during a 30-minute meeting with Hong Kong Chief
Executive Leung Chun-ying on Monday at an Asia-Pacific leaders' summit in the
Indonesian island of Bali.
"Again, we expressed our deepest regret (and said) that it's so contrary to how we
treat visitors in our country," Aquino told accompanying Filipino reporters, according
to transcripts of the interview released by his office on Tuesday.
Aquino said he emphasised to Leung that the apology did not mean that "we are at
fault as a country, as a government as a people".
"We pointed out, that from our perspective, there is one lone gunman responsible
for this tragedy," Aquino said.
In 2011 Aquino released a similar statement of regret, while insisting no formal
apology would be given.
Asked whether Leung accepted his expression of regret, Aquino said: "More or less. I
think he mentioned something like 'We recognise that in your culture personal fault
is what you apologise for'."
However Leung gave a less positive assessment of the talks.
"The Philippine side, at the beginning, took the position that the matter has been
resolved. I did not agree," he told Hong Kong reporters in Bali.
"I believe, and I made the case to the Philippine side, that this matter, unless it is
resolved properly, will continue to stand in the way in the normal relationships
between Hong Kong and the Philippines."
Hong Kong has long demanded a formal apology plus compensation for the relatives
of the victims and for the injured.
A disgruntled former policeman hijacked a tourist bus packed with Hong Kong
tourists in Manila in 2010 in a desperate bid to regain his job.
After lengthy negotiations, police launched a bungled assault that left the gunman
and eight hostages dead, plus seven wounded.
In August survivors and relatives of the dead sued the Philippine government in a
Hong Kong court to demand compensation and an official apology.
The incident enraged Hong Kong, a city where an estimated 250,000 Filipino
migrants work, many as domestic helpers.
The Hong Kong government continues to warn its residents against travelling to the
Philippines.
The issue surfaced again this week during the Asia-Pacific Economic Cooperation
summit in Bali, when Indonesia revoked credentials for nine Hong Kong journalists
who had shouted questions at Aquino about the incident.
Aquino said on Monday he agreed with the expulsion.
"Anywhere we go, we are expected to conform to certain norms of behaviour," he
said, adding that the journalists were "very aggressive".

PH among countries most ready for

change
The Philippines may not be among the richest countries, but it is more prepared for change
compared to higher-income economies, a new report showed.
The country was the top performer among lower-middle income countries in the 2013
Change Readiness Index by Swiss audit, tax and advisory firm KPMG.
Globally, the country ranked 18th out of 90 in 2013, up from 38th out of 60 a year ago. It
ranked 4th among developing economies and 3rd in Southeast Asia.
This means Filipinos are in a better position to cope with negative shocks as natural
disasters and to grab opportunities such as technological or market growth.
Readiness for change, KMPG said, has significant impact on [a countrys] ability to achieve
sustained economic growth and share the benefits of that growth with all of its citizens.
The Philippines best score was in terms of government capability where it ranked 14th. It
ranked 23rd in enterprise capability and 26th in people and civil society capability.
The country is exceeding expectations within its income category, KMPG said, adding that
the Philippines outperformed many countries at higher income levels.
What this shows is that low or relatively low income is not an insurmountable barrier to
enhanced change readiness, the KPMG said in its report.
This is an encouraging message for lower income countries with ambitious aspirations, it
added.
The report however noted that the slowdown in the pace of economic reform in the
Philippines may impact its readiness for change.
While the Philippine government appears committed to pushing through reforms, it is
impeded by the difficulty in achieving sufficient political consensus to drive further
progress, the report said.