THE slowdown in the global economy and domestic risks such as restrictions on Philippine Offshore Gaming Operators (POGOs) and a ban on new economic zones in Metro Manila could shave off at least 0.5 percentage points from the country’s growth this year, according to the Asean+3 Macroeconomic Research Office (Amro).
In its Annual Consultation Report released on Tuesday, Amro said, however, that higher government expenditure will allow the economy to grow by 6.4 percent this year. This is below the government’s full-year target of 6.5 to 7.5 percent.
Amro said the US-China trade tensions, global policy uncertainties and business sentiments will weigh on investment spending while domestic risks involving POGOs and economic zones in the National Capital Region (NCR) could dampen the growth of the property market.
“The authorities concur with Amro’s assessment of the risk factors facing the Philippine economy, particularly the uncertainties from the external environment. While the authorities agree that policy restrictions may affect the property market, they believe the impact will be moderate and manageable,” Amro said.
The global slowdown alone, Amro said, would shave off 0.5 percentage point from GDP growth. This will also be negatively affected by the “downswing” in the global semiconductor sector. Such downswing will significantly affect the Philippine economy as electronic products comprise the country’s top export.
In 2019, data from the Philippine Statistics Authority (PSA) showed electronic product exports accounted for 56.88 percent or $40 billion of total exports amounting to $70.33 billion. The country’s semiconductor exports amounted to $29.46 billion in 2019.
“Given the dominance of electronics products in the Philippines’s total exports, a slower-than-expected recovery of the semi-conductor cycle can keep exports depressed and dampen growth,” Amro said.
On the domestic front, Amro said the moratorium imposed on the issuance of POGO licenses and other industry uncertainties as well as the ban on the creation of new ecozones in NCR would dampen office space demand.
Data show a large portion of new office supply in the next five years will be in Metro Manila, Amro said. With this, the government’s restrictions could lead to lower office and housing occupancy rates and rentals.
Amro expressed concerns that this will lead to a “cooling off” in the country’s property sector which, in turn, could “cause distress” in the loan portfolios of banks.
“[The] impact is not contained within the property market, considering its backward and forward linkages to the rest of the economy. Also, policy restrictions on POGOs and setting up economic zones will not only affect the National Capital Region. Data shows that working permits have been granted to POGO companies to operate in major cities outside Metro Manila,” Amro said.
In the long term, Amro said the Philippines’s efforts to boost its labor productivity will be a challenge. Amro said this is amid recent developments that labor productivity has increased and has been higher than its regional peers in the past three years.
Amro said attaining and sustaining high labor productivity will largely depend on the country’s ability to upskill the labor force and facilitate the entry of workers to high productivity sectors such as manufacturing and services.
Last year, Socioeconomic Planning Secretary Ernesto M. Pernia said low-productivity jobs, particularly in the agriculture sector, remain a concern for the government.
Pernia said this is why more needs to be done to further cut unemployment and underemployment.
These efforts include implementing well-thought-out and sustainable policies to improve employment growth, particularly in the agriculture sector and overall employment in the country.
Pernia said the continued decline in agricultural employment is also largely attributed to rising cost of inputs amid low profit, limited access to credit, poor infrastructure and vulnerability to environmental risks.