Uneven and uncertain global growth prospects in markets around the world and the ability of the government to ramp up spending constitute the main challenges the Philippines must hurdle to achieve a higher growth rate this year.
At the annual breakfast meeting with journalists and editors at the so-called Tuesday Club, Bangko Sentral ng Pilipinas Governor Amando M. Tetangco Jr. bared the economic challenges the central bank and its global colleagues face in 2015.
Tetangco said while last year was a “difficult market to call” due to so-called taper scares during the period, 2015 may not be “any easier to call” as well given recent developments around the world.
“For one, global growth prospects remain uneven. In particular, while a robust economic recovery is seen to be under way in the United States, economic activity in the Euro Area continues to struggle for some
traction,” Tetangco said.
“The Japanese economy has recently fallen into a technical recession. The outlook for emerging markets has become relatively more subdued as well, as key emerging markets such as China grapple with structural bottlenecks that make growth prospects more challenging,” he added.
Tetangco said that this unevenness forms the basis for the continued divergence in monetary policy in advanced economies this year. He also cited continuing geopolitical concerns that can reverse the declining price of oil, such as those in the Middle East and in Russia.
These uncertainties, the central bank chief said, help trigger volatility in financial markets and add to the air of skittishness generated by what or when the US Federal Reserve will do next.
“This volatility can impact valuation of assets and liabilities of banks, their corporate clients and also their households,” he said.
On the domestic front, Tetangco remains optimistic on continue robust growth for the Philippines but reiterated the need for the government to start spending more this year on projects that will benefit the country over the long haul.
“It remains critical that the government ramps up spending to provide the vital infrastructure projects that will sustain economic growth in the medium term,” Tetangco said.
“The latest Development and Budget Coordinating Committee projections see real gross domestic product growing at 7 percent to 8 percent in 2015. This target is above the long-run average of about 4.9 percent. To help ensure this target is achieved, the national government must increase its spending,” Tetangco said.