publication
Philippine Economic Update - January, 2015 Edition


Highlights
  • The World Bank expects the Philippine economy to grow at 6.5 percent in 2015 and 2016 despite a weak global economy.
  • Growth forecast was revised for 2014 to 6.0 percent from 6.4 percent, owing to slower government spending and lower farm production.
  • The economy can grow beyond 6.5 percent if the government can fully utilize its budget as planned and accelerate reforms.

Report Highlights

 

• Economic growth slowed down to 5.3 percent in the third quarter of 2014, due to weak government spending on the demand side and agricultural production on the supply side.

• Government consumption contracted by 2.6 percent while infrastructure spending fell by 6.2 percent. Contributing to weak government spending are the Supreme Court decision which found some provisions of the Disbursement Acceleration Program unconstitutional, budget execution bottlenecks, and slow disbursement for Typhoon Yolanda reconstruction.

• Despite the slowdown, more than a million jobs were created in October 2014, although the quality of jobs remains a challenge. The 2013 Annual Poverty Indicator Survey (APIS) finds that real income of the bottom 20 percent grew much faster than the rest of the population. The survey also confirms that the government’s conditional cash transfer program is reaching the poor, as reflected in the substantial growth of domestic cash transfers to the bottom 20 percent.

• Lower government spending, investment delays and slowdown, and weaker exports are likely to limit economic growth to 6 percent in 2014 and 6.5 percent in 2015. Provided that government can fully commit to utilizing the budget as planned, as well as accelerating reforms, achieving growth of above 6.5 percent can be achieved.

• Translating higher growth into inclusive growth can help the government achieve its poverty target of 18 to 20 percent by 2016. 

• Eradicating poverty requires a commitment to implement key reforms in the areas of infrastructure, health and education; enhancing competition to level the playing field; simplifying regulations to promote job creation; and protecting property rights.

• Higher investments need to be supported by tax policy reforms as tax administration reforms are inadequate to fully fund the investment gap. Worsening port and road congestion and possible power shortages in 2015 underscore the need to urgently raise investments. 

• Tax policy reform should aim for a more equitable, efficient and simpler tax system.

• Reforms to strengthen tax administration and improve the transparency and accountability of government are essential to make it a success. Key reforms include the passage of the Freedom of Information bill, which institutionalizes open data, enhancing budget reporting, and simplifying tax procedures and processes.

• Higher investments in infrastructure, health, and education need to be complemented by reforms to enhance competition. Essential reforms include crafting and implementing a clear competition policy, liberalizing key sectors of the economy to directly benefit poor Filipinos, and opening up the economy to more foreign competition.

 

Special focus sections:

* Congestion in Metro Manila and its impact on the economy

* Potential power shortages in Luzon and the way forward

* Reviving Philippine electronics exports

* Liberalizing rice policy in the Philippines

* Enhancing competition in the domestic shipping industry

 







Contacts

Manila
Dave Llorito
Email

Washington
Carl Hanlon
Email