Economy



By Melissa Luz T. Lopez, Senior Reporter


Philippines rises 12 places in economic freedom ranking




Posted on February 20, 2017


THE PHILIPPINES rose to the 58th spot in this year’s Index of Economic Freedom, riding on robust economic growth and fiscal gains, although concerns remain on whether these can be sustained under the new government.

BW FILE PHOTO
The Philippines rose by 12 spots from 70th of 186 countries the previous year, buoyed by a 2.5-point increase in its overall score to 65.6. This rating is higher than the 60.4 average across the Asia Pacific and 60.9 across the globe, according to the United States-based think tank The Heritage Foundation.

[VIEW THE INFOGRAPHIC]

The group cited gains in “fiscal policy, government spending, and monetary stability” in raising the country’s score. Across the region, the Philippines placed 14­­­th and is classified as “moderately free.”

“Despite the challenging global economic environment, the Philippines has achieved notable economic expansion, driven by the economy’s strong export performance and inflows of remittances that have bolstered private consumption,” read the 2017 index report published over the weekend. “The absence of entrepreneurial dynamism, however, still makes long-term economic development a challenging task.”

The Philippine economy expanded by 6.8% in 2016, falling within the government’s 6-7% growth projection range and allowing the country to remain as one of the fastest-growing in the region.

Growth remained largely driven by a surge in investment and sustained consumer spending, allowing the economy to post rapid expansion at a time of weak global demand.

Hong Kong remained in the top spot with a score of 89.8, followed by Singapore (88.6) and New Zealand (83.7). At the bottom are Cuba (33.9), Venezuela (27), and North Korea (4.9).

The economic freedom index -- which measures how policy changes affect overall quality of life in a country -- has improved for most nations over the past year, the group said.

In particular, the Philippines posted its highest ratings on fiscal health (97.2) and government spending (89.4), with the state able to keep public debt levels at 37.1% of gross domestic product (GDP) despite raising overall disbursements, the report showed.

The country also scored higher on monetary freedom at 80.6, citing the ability of the Bangko Sentral ng Pilipinas (BSP) to keep prices stable. Inflation averaged 1.8% in 2016, lower than the central bank’s 2-4% target band.

Financial freedom steadied at 60 points, with the think tank saying that the local financial system remains “relatively stable and sound” and supported by the BSP’s plan to grant new bank licenses.

Meanwhile, the group pointed out a “gradual” improvement in the business climate as time spent for licensing requirements are reduced, but noted that investment freedom remains “limited” with some industries still closed off to foreign players.

However, the Heritage Foundation pointed out weak rule of law in the Philippines, which posted poor scores for property rights, judicial effectiveness, and government integrity: “Courts are hampered by inefficiency, low pay, intimidation, and complex procedures. Corruption and cronyism are pervasive. A few dozen leading families hold a disproportionate share of land, corporate wealth, and political power.”

“A culture of impunity is reinforced by the strong-arm tactics of the new President,” the report added.

Looking ahead, the group said socioeconomic reforms proposed by President Rodrigo R. Duterte during his first days in office could provide a further lift to the country’s economic freedom scores.

“The government is pursuing a series of legislative reforms to enhance the overall entrepreneurial environment and develop the stronger private sector that is needed to generate broader-based job growth. Progress has been mixed, although some fiscal reforms have been accomplished,” the report read, while pointing out that much depends on Mr. Duterte in maintaining and expanding “successful” policies put in place by the Aquino administration.

In a statement sent through the government’s Investor Relations Office, Finance Secretary Carlos G. Dominguez III said passing his department’s proposed tax reform plan would be key to securing such gains.

“For the Philippines to aspire to move up higher from the ‘moderately free’ to the ‘mostly free’ category in the near future, the Duterte administration needs to pursue without letup its CTRP (comprehensive tax reform program) along with other bold reform initiatives to keep the high-growth momentum, upgrade the living standards of the Filipino poor, eliminate official corruption, and improve the ease of doing business in order to attract more investments and create jobs for all,” Mr. Dominguez was quoted as saying.

The government is looking to push growth to as much as 8% by 2022, while trimming the poverty rate to a low of 14%.