In the past few years, the Philippine economy emerged from being a laggard, and is now considered a regional leader when it comes to the pace of economic growth.
Both the Asian Development Bank (ADB) and the World Bank expect the Philippine economy to sustain robust growth with the government’s focus on infrastructure spending and tax reform.
In its Asian Development Outlook 2017 Update, the ADB retained its Philippine gross domestic product (GDP) growth outlook for this year and 2018 at 6.5 percent and 6.7 percent, respectively, from its Asian Development Outlook 2017 Supplement report in July.
In its East Asia Pacific Economic Update, which was released last week, the World Bank said it expected the Philippine economy to grow by 6.6 percent this year and by 6.7 percent in 2018.
The government’s official GDP growth targets are 6.5-7.5 percent for 2017 and 7-8 percent for 2018.
The boosts for economic growth are coming not only from President Duterte’s focus on infrastructure spending and tax reform, but also from his independent foreign policy. In particular, the revival of friendly ties with China after years of strained relations under the previous administration, as well as closer relationship with Russia, is creating new opportunities for the Philippine economy.
Tourism is among the first industries that benefited from the President’s new foreign policy. Following the President’s visit to China in October 2016, Beijing lifted its travel advisories against Chinese visits to the Philippines.
According to the Department of Tourism, improved relations between the two countries resulted in 73,649 Chinese visiting the country in May 2017, a whopping 57.29-percent jump compared to 46,825 Chinese visitors in May last year.
For the first five months of 2017, China was the third-largest source of international visitors (after Korea and the United States) with 388,896, comprising 13.49 percent of the total 2.52 million arrivals.
Among the top 10 markets, China and Taiwan posted the highest growths of 36.29 percent and 20.99 percent, respectively.
This year, the Philippines expects the number of Chinese tourists to reach the one million mark, a 49% increase on the roughly 670,000 visitors in 2016. This will bring the country closer to the tourism department’s full-year target of seven million arrivals, following a 2016 showing of just 5.9 million.
The size of the Chinese market also presents a huge destination for our agricultural exports.
In March this year, China signed agreements to buy $1.7 billion worth of bananas and other fruits and agricultural products from the Philippines.
The Department of Trade and Industry (DTI) says the 34-percent increase in exports to China, Hong Kong and Russia contributed to the $4.3-billion increase in Philippine exports during the first five months of 2017. China is the country’s fourth largest export market and the number one source of imports.
For its part, Russia committed to buy an estimated $2.5-billion worth of Philippine fruits, grains and vegetables. The commitment was made during the first meeting between President Duterte and Russian President Vladimir Putin at the 2016 Asia-Pacific Economic Cooperation (APEC) meeting in Peru.
Chinese commitment in financing local infrastructure projects is also expected to accelerate growth of foreign direct investments (FDI). Foreign chambers of commerce and industry say the Philippines has a potential to attract at least $10 billion worth of FDI per year, but only received $7.9 billion in 2016. For the first half of 2017, net FDI inflow totaled $3.6 billion, down 14 percent from $4.2 billion a year ago.
Among its infrastructure commitments, China has agreed to finance the construction of two bridges that would provide additional crossings on the Pasig River.
Last June, Public Works and Highways Secretary Mark Villar and Embassy of China in the Philippines Economic and Commercial Counselor Jin Yuan signed the agreement for a full grant from China for the construction of the Binondo-Intramuros Bridge in Manila and Estrella-Pantaleon Bridge in Mandaluyong City. The two bridges, which are the first infrastructure projects with China under the Duterte administration, are estimated to cost more than P700 million.
China has also committed to provide grants for the construction of the Panay-Guimaras-Negros Link Bridges and Davao City Expressway.
The Chinese government is also reviewing loan applications for other priority infrastructure projects, including the $3.01-billion south line of the North-South Railway, the $53.6-million Chico River Pump Irrigation Project in Cagayan and Kalinga provinces, and the $374-million New Centennial Water Source-Kaliwa Dam Project in Quezon province.
We’re getting all these benefits not because we have established special relationships with China or Russia. Some people panicked or were at least worried when President Duterte launched his independent foreign policy.
But he only established normal ties between the Philippines and other equal sovereign states – China and Russia. And it’s proving to be beneficial to us. And the United States, whose president is coming in November, continues to be a friend of the Philippines.
We did not give up or lose anything, but we gained a lot.