Threat to peace adds to growth risks

February 16, 2015 at 14:01

Posted on February 11, 2015 10:10:00 PM

THE PHILIPPINES remains poised for more robust economic growth this year, but mounting uncertainty over the peace process has added to risks that could cloud that outlook, the state socioeconomic planner said in a forum in Makati City yesterday.

Noting that last year ended with relatively strong economic expansion that validated “a higher growth trajectory,” Arsenio M. Balisacan, director-general of the National Economic and Development Authority, admitted “we are wary of the disruptions in the peace process” among a host of local and overseas sources of risk.

Legislative action on a bill that will provide the legal framework for a new autonomous region in Mindanao — a key component of the peace deal between the government and the Moro Islamic Liberation Front — has stalled in both chambers of Congress in the wake of Jan. 25 hostilities in Maguindanao that killed 44 police commandos out to capture or kill two terrorist suspects. Police authorities bared in a hearing in the House of Representatives yesterday that at least three of the troops were executed even as they lay wounded.

“Amid the challenges faced by the country last year, the economy was able to achieve a full-year growth of 6.1% — high by the standard of major developing economies,” Mr. Balisacan said in his speech at “Prospects for the Philippines Forum” hosted by the Foreign Correspondents Association of the Philippines at Fairmont Makati hotel. “We expect to see this trajectory to continue its path for 2015 and 2016.”

He noted that the economy, which has relied for years on private consumption and services for support, should continue “rebalancing” to give other segments a bigger role if growth is to make a dent on joblessness and poverty.

“Private consumption, representing over two-thirds of GDP, is fuelled partly by OFW (overseas Filipino workers), and in part because of this, services also enjoys a very large part of national output, accounting for over half of GDP,” Mr. Balisacan said in his presentation.

“However, in order to generate more and high-quality jobs and reduce the country’s vulnerability to regional or global shocks, there needs to be a rebalancing of the economy’s composition, where less prominent components of GDP must grow even more,” he added, citing the roles particularly of investments and net exports (exports less imports) as well as manufacturing and agribusiness.

“Without this rebalancing, the generation of remunerative, high-quality jobs for the fast-growing labor force and winning the war against poverty will be far harder — if not impossible — to achieve.”

The government, he said, now hopes for GDP growth to hit 7-8% this year and next, for unemployment rate to slide to 6.6% next year from 7.1% in 2013, and for underemployment rate to fall to 17% in 2016 “from the current 19.3%”.

He said “the government remains on guard” against risks like normalization of US monetary policy, slowdown in large emerging economies, eurozone weakness, Japan’s recession, infrastructure project delays, natural calamities and thin power reserves next quarter, but added a new factor: “We are wary of the disruptions in the peace process.”

Asked later on to expound on this issue’s impact on the economy, Mr. Balisacan replied: “We hope that this quickly comes to a close so that the economic impact would be much under control.”

In the forum, Miriam Coronel-Ferrer, who heads the government peace panel facing the MILF, clung to hopes the proposed Bangsamoro Basic Law would be approved by Congress despite the incident. But she expressed fears the window is closing for this and the plebiscite that should follow since political leaders are expected to be increasingly preoccupied with preparations for the 2016 elections starting the third quarter.

Sought for comment, Bank of the Philippine Islands Associate Economist Nicholas Antonio T. Mapa said the state’s growth target is achievable but would be a “tall order to hit… given the constraints the economy will be faced with.”

He said the peace issue’s “bigger effect may be on investor confidence” since “[p]olitical stability has been one of the hallmarks of our recent positive run.” — Mikhail Franz E. Flores