By Zinnia B. Dela Peña (The Philippine
Star) | Updated August 21, 2014 - 12:00am
MANILA, Philippines - The Philippine
economy seems headed for long-term growth with the possibility of expanding
beyond 7.2 percent even in the absence of election-related spending, the
Department of Finance said.
Finance Undersecretary Gil Beltran
said the Philippines is seen to pick up more speed in the medium-term given its
strong macroeconomic fundamentals.
“The medium-term growth prospects of
the economy are sound. The Philippine economy has the capacity to grow faster
than the 7.2 percent attained last year with or without the boost from election
spending,” Beltran said.
Beltran, who is also the country’s
chief economist, said the Philippines’ gross national savings exceed its gross
domestic investment by three to six percent of gross domestic product (GDP).
He said that in the last 10 years,
surplus savings averaged 3.3 percent using the current account balance in the
BOP (balance of payments) as basis. In the first quarter, it was pegged at 3.1 percent of GDP.
Using the national income accounts
approach, the average excess saving for the last decade is 3.8 percent of GDP.
Last year, it was 5.2 percent of GDP.
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“This implies that the Philippines has excess
resources to spend to push the economic growth higher. If these savings
surpluses were invested in productive activities, the economy would grow by the
amount of new investments plus the real rate of return on investment,” Beltran
said.
Beltran said increased public
spending on infrastructure would help
the Philippines achieve sustainable growth.
The government aims to boost the share of infrastructure spending to GDP
to five percent by 2016.
“Regression analysis shows that
government infrastructure investment has a real GDP growth elasticity of 1.96
that implies that the economy will grow by almost twice the original amount of
investment,” Beltran said.
“If these trends continue and plans are
implemented as targeted, the country would attain the 6.5-7.5 percent growth target for 2014 and the 7-8 percent
growth in 2015,” he added.
Beltran also said that the slowdown of
growth to 5.7 percent in the first quarter was just a “short-term phenomenon
and should not be seen as a trend.”
He pointed to the manufacturing
sector’s return to double-digit growth level
in the first quarter as well as the continued robust investment growth.
Beltran said the lowering of the
inflation target would not have any impact on the country’s economic growth.
“In theory, when growth rises, the supply of
goods available in the market also rises. This dampens price levels and in
turn, reduces interest rates. This is
the reason why the lowering of the inflation target should not be seen as
negative factor for growth. The BSP’s moving from a regime of negative real interest
rates to positive real interest rates is more sustainable in the long run; it
avoids bubbles and maintains the growth of savings,” Beltran said.
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