Inclusive growth still a ‘pressing’ issue -- DoF’s Beltran

Posted on January 30, 2016

INCLUSIVE GROWTH will remain a “pressing” issue for the Philippines, according to the Finance department’s chief economist, despite an economic performance believed to have stood out in Asia last year.

“Inclusive growth will continue to be a pressing socio-economic issue,” Finance Undersecretary Gil S. Beltran noted in an internal economic bulletin posted following the release of the Philippine gross domestic product (GDP) data for last year.

Mr. Beltran, however, noted that foundations of micro-finance and micro-insurance were already laid out while the conditional cash transfer program was expanded -- thanks to a larger fiscal space.

The economist also cited the increasing contribution of manufacturing to the country’s expanding output and its “many backward and forward linkages” to the economy.

“Thus, the promotion of this subsector has many implications on inclusive growth. This calls for, among others, the mobilization of more resources to MSMEs (micro, small and medium enterprises) engaged in manufacturing activities.”

The increased participation of MSMEs in both local and international trade to promote inclusive growth was listed as one goal of the Cebu Action Plan adopted by Asia-Pacific Economic Cooperation.

“Currently, innovative ways of financing MSME operations are being studied such as the use of movable collaterals,” Mr. Beltran noted.

The Philippine economy expanded 5.8% last year, less than the 6.1% seen in 2014 because of weaker performances in the export, agriculture and industry accounts.

Household and government consumption have particularly buttressed the economy under the Aquino administration, which posted an average growth of 6.2% for the past six years.

“Government consumption has contributed an average 0.6 percentage point (ppt) to GDP growth, double the 0.3 ppt contribution in the past decades. Contribution of capital formation (investment) has more than doubled,” Mr. Beltran said.

On the supply side, industry’s contribution to GDP growth rose 2.4 ppt or nearly double the 1.5 ppt average in the 2000-2010 period. Manufacturing, in particular, accounted for 1.7 ppt while services gave 3.7 ppt.

“Despite the ongoing volatilities in the international financial markets, moderating economic growth in China, and continuing decline in international trade, the bottom line, that is GDP growth rate, remains robust,” Mr. Beltran said.

The Finance official cited latest Global Economic Prospects report of the World Bank, which gave the Philippines among the strongest growth prospects amid challenging external developments.

“The lower prices of energy will benefit the domestic economy in terms of lower transportation and electricity costs. Prices of commodities, in general, are forecast to be lower in the short-term,” Mr. Beltran noted.

Despite the El Niño, food prices could remain generally stable in the international market said the World Bank’s quarterly Commodity Market Outlook.

“This should translate into more stable food prices in the domestic market. However, agricultural exports, such as coconut oil and bananas, may be negatively affected. This is also true for the mining sub-sector,” Mr. Beltran said.

The economist added that “to sustain economic growth, more investment in infrastructure such as in power and transportation should be mobilized.” -- Keith D. Mariano