Philippine Economy Heads for Long-Term Growth

Recent research has suggested that the Philippine economy may be set to experience long-term growth, expanding even further than the 7.2% estimated in the absence of common election-related costs. The department of finance are positive about the projected future for economic growth, and undersecretary of finance, Gil Beltran, suggested that the Philippines may even begin to pick up a greater amount of speed throughout the medium term, as a result of its strong macroeconomic fundamentals.

Recent research has suggested that the Philippine economy may be set to experience long-term growth, expanding even further than the 7.2% estimated in the absence of common election-related costs. The department of finance are positive about the projected future for economic growth, and undersecretary of finance, Gil Beltran, suggested that the Philippines may even begin to pick up a greater amount of speed throughout the medium term, as a result of its strong macroeconomic fundamentals.

Beltran commented that the growth prospects for the medium-term economy look to be particularly sound this year, suggesting that the economy in the Philippines now has the capacity to grow further and faster than before, topping even the 7.2% that it gained throughout the past year, with or without the boost attained from elective spending. He believes that the gross national savings for the country currently exceed its gross domestic investment by approximately 3 to 6% of GDP (gross domestic product).

Growth over the Last Decade

Beltran announced that economic growth within the country over the last ten years in regards to surplus savings equaled approximately 3.3% if the current account balance in balance of payments was used as a basis. During the first quarter, it was pinned at approximately 3.1% of GDP.

Using the approach of national income accounts, the excess saving throughout the last decade has averaged around 3.8% of GDP, in comparison to the 5.2% achieved last year. These numbers suggest that the Philippines currently has the necessary extra resources to spend money and push the economy higher in terms of growth. If the surplus savings were, for example, invested in further productive activities, they could allow the economy to continue growing according to new investments, whilst providing extra growth opportunities in the form of return on those investments.

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It is believed that an increase of public spending towards infrastructure could help the Philippines to achieve a sustainable quantity of growth, whilst boosting spending on infrastructure to GDP by five percent within the next two years.

By the Numbers

Regression analysis has shown that the infrastructure investment by the government has a delivered a growth elasticity of approximately 1.96, meaning that the economy is capable of growing by almost twice the original amount that was invested. If the current trends continue and plans are implemented to help move targets along, then the country should be able to easily achieve:

• Its target of 6.5-7.5% growth for the year of 2014

• The target of 7.-8% growth for 2015.

• Following Improvement in the coming years

Although growth did slow slightly during the first quarter, reaching only 5.7%, Beltran suggested that the issue was simply a short-term, temporary problem that should not be regarded as a consistent trend. He believes that the continually robust investment growth and the manufacturing sector’s return to growth level in double digits implies a healthy economic future for the Philippines.

It looks like the Philippines are trying to compete with Taiwan but they have a ways to go before they equal an economy that size.