Philippines: Further reforms to strengthen growth, create more and better jobs
April 7, 2014
MANILA, APRIL 7, 2014 – The Philippines is likely to remain as one of the fastest growing economies in the East Asia and Pacific region in the next two years. Further reforms, including the removal of remaining barriers to doing business for firms of all nationalities and sizes as well as improving logistics, will strengthen the country’s competitiveness and enhance its capacity to generate more and better jobs.
This is one of the key messages of the East Asia and Pacific Update released today by the World Bank through videoconference from Singapore.
Developing East Asia will grow by 7.1 percent this year, largely unchanged from 2013, the report says. As a result, East Asia remains the fastest growing region in the world, despite a slowdown from the average growth rate of 8.0 percent from 2009 to 2013. In China, growth will ease slightly, to 7.6 percent this year from 7.7 percent in 2013. Excluding China, the developing countries in the region will grow by 5.0 percent, slightly down from 5.2 percent last year.
“East Asia Pacific has served as the world’s main growth engine since the global financial crisis,” said Axel van Trotsenburg, World Bank East Asia and Pacific Regional Vice President. “Stronger global growth this year will help the region expand at a relatively steady pace while adjusting to tighter global financial conditions.”
Larger Southeast Asian economies, such as Indonesia and Thailand, will face tougher global financial conditions and higher levels of household debt. Malaysia’s growth will accelerate modestly, to 4.9 percent in 2014. Its exports will increase, but higher debt servicing costs and ongoing fiscal consolidation will weigh on domestic demand.
In the Philippines, growth could slow to 6.6 percent, but accelerating reconstruction spending would offset the drag on consumption from the effects of natural disasters in 2013.
The report says that the region’s developing countries, including the Philippines, could benefit from structural reforms, such as facilitating international trade and promoting foreign direct investment, especially in the services sector. In this context, the establishment of the ASEAN Economic Community in 2015 could boost intra-regional investment and exports and provide an important source of growth, the report says.
“Reforms for attracting more foreign investments will work best for the country if done as part of broader changes. These reforms could be complemented with measures to improve logistics and trade facilitation as well as the cost of doing business to encourage more investments from both local and foreign firms, big and small,” said World Bank Country Director Motoo Konishi.
“A comprehensive agenda to support job creation by firms of all sizes in agriculture and manufacturing is needed to strengthen the country’s inclusive growth trajectory. Reforms to secure property rights, enhance competition, simplify regulations, and increase investments in health, education, and infrastructure can make this happen,” said World Bank Lead Economist Rogier van den Brink.
Risks to the regional forecast remain. “A slower-than-expected recovery in advanced economies, a rise in global interest rates, and increased volatility in commodity prices on account of recent geo-political tensions in Eastern Europe serve as reminders that East Asia remains vulnerable to adverse global developments,” said Bert Hofman, Chief Economist of the World Bank’s East Asia and Pacific Region.
On the bright side, as last year’s tapering episode demonstrated, flexible currencies will help East Asia deal with external shocks, including potential capital-flow reversals. In addition, most countries have adequate reserves to cover temporary trade and external shocks.
“Over the longer term, to keep growth high, developing East Asia should redouble efforts to pursue structural reforms to increase their underlying growth potential and enhance market confidence,” Hofman said.
The East Asia and Pacific Update is the World Bank’s comprehensive review of the region’s economies. It is published twice yearly and is available free of charge at http://www.worldbank.org/eapupdate
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