By Lawrence Agcaoili (The Philippine Star) Updated December 18, 2011
12:00 AM Comments (0)
MANILA, Philippines - London-based think-tank Capital Economics Ltd said
it is possible for the country to achieve a gross domestic product (GDP)
growth rate of eight percent through improved infrastructure and
business environment.
Gareth Leather, Asian economist from Capital Economics, said in a report
that a growth rate of eight percent could be attainable but a six
percent expansion is more likely.
He said the Philippines is unlikely to achieve the growth rates seen in
neighboring economies at a similar stage of development while its
business environment remains so weak.
"The government has ambitions to boost the annual rate of growth to
eight percent, but this will only happen if it is able to push ahead
with plans to improve infrastructure and the business environment,"
Leather stressed.
He pointed out that the Philippines has slipped from being one of the
richest countries in Asia in the 1960s to being one of the poorest today.
The think-tank said GDP growth in the Philippines averaged just 2.8
percent per year in the 1990s compared to 6.7 percent in Asia ex-Japan
over the same period.
Although growth picked up in the 2000s to an annual average of 4.4
percent, Leather said this was still around half the rate that most
other economies in the region achieved when they were at the same level
of development.
"What's more, rapid population growth in the Philippines means that its
relative performance on a GDP per head basis has been even worse. In the
1960s the Philippines was one of the richest countries in Asia."
He added that the GDP per capita of the country fell to 40 percent of
the emerging Asia average in 1980 and just 15 percent in 2010.
"The Philippines' low level of GDP per head means there is plenty of
room for catch-up growth. In addition, the Philippines' geographic
position in the fastest growing region of the world economy and
proximity to some of the busiest shipping routes in the world are big
plus factors. As a result, growth could potentially accelerate
significantly," he said.
Capital Economics said the main cause of the weak performance of the
Philippines has been low investment.
"We believe that the key reason for the Philippines' under-performance
has been weak investment. Investment boosts productive potential, which
is why there is a strong relationship between investment-to-GDP ratios
and growth rates in subsequent years for many Asian economies," it added.
It explained that demographic factors should push the savings rate
higher over the next decade, which should in turn support stronger
investment and faster economic growth.
"There is no universal optimal rate of investment, but in a poor country
with a low capital stock, there is plenty of potential to boost growth
through investment in new machinery and infrastructure," Leather said.
At the moment, the investment ratio in the Philippines of around 20
percent is similar to that in Japan and some euro-zone countries, and
well below the levels seen in other fast-growing Asian economies.
Capital Economics said the poor business environment in the Philippines
has also undermined the country's export sector. Exports were the
equivalent to just 32 percent of GDP in the Philippines.
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