The latest GDP growth rate may have caused disappointment to a number of Filipinos, but the figure reflects the country’s economic potential, according to economists from the Ateneo Center for Economic Research and Development (Acerd).
In an EagleWatch forum on Thursday, Acerd Director Alvin P. Ang shared the observation of an economist from the Asian Development Bank, Jesus Felipe, who said the country’s GDP growth potential was around 6.3 percent.
Ang said this could explain the reason the country has not experienced any more of the boom-bust scenarios typical in previous years during and after elections.
“If we’re growing at an average of 6 percent, 6.3 percent, that’s the reason we are coming back to that rate, because that’s our potential at the moment. So you need the infrastructure [buildup] to increase that potential,” Ang said.
“If the potential is at that level, we are already maximizing it, we will always [grow] below that. We are not actually doing bad. [The figure] is in line with our potential growth. So you need to invest in infrastructure to grow faster,” he said.
Ang said the country’s potential growth rate was not far from the 6 percent recorded in the first quarter and was actually the average GDP recorded in the first half.
The figure is also within the expectations of Acerd. In 2018 they estimated the country’s GDP to grow by an average of 6.1 to 6.3 percent this year while, in 2019, GDP is expected to expand by 6.2 to 6.5 percent.
‘BBB’ or bust
Investing in infrastructure also means allowing more sectors to contribute to economic growth. This includes manufacturing, wholesale and retail sector, and financial sector.
For the economy to grow faster, the Duterte administration has embarked on a P7.74-trillion infrastructure initiative under the “Build, Build, Build” (BBB) program, which includes 75 flagship projects and around 4,500 projects nationwide.
Former Socioeconomic Planning Secretary Cielito Habito said, however, that veering away from private sector financing in funding these projects poses risks, such as a new debt crisis.
However, Habito said the country is still nowhere near debt crisis, thanks in part to the prudence exercised by previous administrations, which benefitted the country’s finances.
The country’s external debt to GDP ratio remains healthy at 23 percent, significantly lower than its Asean neighbors.
Habito said the external debt to GDP ratio of Asean countries like Singapore is 449.4 percent; Malaysia, 69.1 percent; Indonesia, 34.8 percent; and Thailand, 32.1 percent. Nonetheless, he said the threat remains.
“The worry of course, because we are getting more debt, specifically from China, which is extending high-interest debt, are we heading towards another debt crisis? Maybe not yet,” Habito said. “But that will really change if we are irresponsible or reckless about the way we get into debt in the near future.”
Cheaper food
Habito said that, apart from investing in infrastructure, there is a need to lower food prices not only to give consumers some reprieve from high inflation but to prevent stunting.
He said 1 in 3, or 33.5 percent, of children below 5 years old are stunted, and another 7 percent are wasted or underweight. This means they will suffer from being permanently impaired from reaching their full brain and physical development.
Stunting will prevent children from fully contributing to the economy as working adults. Habito said this may make these children “mediocre” when they grow up, or become “unproductive” workers.
While the Philippine population remains young, reaping the full benefits of the demographic dividend from now until 2050 means having a strong and capable labor force.
If the working population are disadvantaged from a young age, the country’s demographic dividend could become a “demographic time bomb” instead. “If we don’t do something now, it could lead to a demographic time bomb rather than a demographic sweet spot,” Habito said.
To cut food costs in the country, Habito said there is a need to pursue the tariffication of the quantitative restriction on rice and to veer away from rice self-sufficiency. This, he said, will cut commodity prices and free up public funds for other cash crops that have the potential to raise farmers’ incomes.