THE Asian Development Bank (ADB) and the ASEAN+3 Macroeconomic Research Office (AMRO) said five industries are candidates to become growth drivers after the pandemic — tourism, agro-processing, electronics, garments, and digital trade.
At a webinar organized by the bank and the research office, ADB Senior Economist James P. Villafuerte said the recovery in these industries will depend on cooperation within the Association of Southeast Asian Nations (ASEAN), as well as their major trading partners Japan, China, and South Korea.
He said tourism all over the region took a major hit during the pandemic, with the Philippines seeing visitor arrivals declining 84% in 2020.
“Therefore, to rebuild the industry, it is essential that governments in the region work together to restore tourism demand, through strong marketing and information campaign(s),” Mr. Villafuerte said. “They have also to focus to make travel safer with clear health and entry protocols.”
The agro-processing sector, on the other hand, is overly reliant on simple processing methods, with low utilization of automation and technology.
To this end, Mr. Villafuerte recommended “…harmonizing food standards within the region, creating more transparent and efficient supply chains, adopting technologies and improving processes to enhance product quality.”
“Electronics is very important to Southeast Asia… in the Philippines, electronics comprised about 53% of its exports,” Mr. Villafuerte said.
However, countries need to upgrade from low-value electronics, involving mostly assembly, to higher-value segments, which include “innovation and product design.”
Digital trade is a new area for growth in the region, comprising about 5.4% of exports, but 89% of Filipino business process outsourcing (BPO) workers are at risk of automation, which would lead to a loss of jobs. Internet speeds in the Philippines are also among the lowest in the region, at an average of 49.5 mbps.
Mr. Villafuerte said that “In the Philippines, e-commerce exports are relatively small, but we think that they could expand.”
“We think it is important to really enhance digital connectivity in the region,” he added. “I think one of the most important (jobs) is to rethink regulations that protect consumers, particularly in terms of identity and cybersecurity.”
Upgrading the garments sector, which employs a large number of female workers, is also critical.
“We suggest improving competitiveness in the garments sector, through simplified business regulations, faster digital technology adoption, stronger research and development,” Mr. Villafuerte said, adding that there should be “a greater focus on culture-related garments.”
AMRO Group Head and Lead Economist Ling Hui Tan said that “the biggest threat is the fact that the pandemic support and stimulus packages of the past two years have consumed a lot of fiscal resources and these could have been used for public investment.”
Loans raised by the Philippines as of Jan. 14 for pandemic response totaled P1.31 trillion, helping swell the government’s indebtedness at the end of March to P12.68 trillion.
“So the first step for rebuilding fiscal space will be to unwind emergency support measures that were put in place.”
However, she cautioned that withdrawing these policies too soon may cause a rebound effect, stressing that this process should be done selectively, keeping the most essential policies first.
Meanwhile, economists said that household consumption as the economy reopens will remain the main growth driver going into the second quarter.
“I still think that continuing the reopening (of the economy) would be the biggest driver,” Ruben Carlo O. Asuncion, Chief Economist of the Union Bank of the Philippines, Inc., said.
“Another important factor is being able to control inflation, and this is where the Bangko Sentral ng Pilipinas (BSP) comes in (with) the timely raising of key interest rates to help cool down inflation on the demand side.”
BSP Governor Benjamin E. Diokno earlier signaled the intention to raise policy rates sometime in June, a departure from the previous rate hike stance, though the latest inflation data may have led the monetary authorities to act sooner rather than later.
The central bank’s Monetary Board will meet on Thursday.
Mr. Asuncion also cautioned that while resuming face-to-face classes was important, aggressive vaccination efforts and minimum health standards should still be followed.
“The growth drivers may remain those we saw in the first quarter of 2022 — private consumption and capital formation,” Security Bank Corp. Chief Economist Robert Dan J. Roces said. “Rebounding consumption will remain the key factor on the back of improved mobility amid sustained looser curbs.”
He added that looser restrictions are dependent on whether or not the country is able to manage its coronavirus disease 2019 (COVID-19) cases as new variants emerge. — Tobias Jared Tomas