Home Editors' Picks Philippines not yet growth ‘outperformer,’ but still a ‘very recent accelerator’
Philippines not yet growth ‘outperformer,’ but still a ‘very recent accelerator’
By Elijah Joseph C. Tubayan, Reporter
THE PHILIPPINES fell short on being an economic “outperformer” among emerging markets, according to a discussion paper from McKinsey Global Institute (MGI) which nevertheless noted that the country’s rapid growth in recent years signals its potential to be so in the medium to long term.
MGI classifies “outperformers” as economies with an average of at least 3.5% annual per capita gross domestic product (GDP) growth over 50 years or five percent annual growth over 20 years.
In its latest report, MGI found that Association of Southeast Asian Nations (ASEAN) accounted for eight of the 18 developing countries in the category. Notable were Indonesia, Malaysia, Singapore, Thailand that grew above 3.5% in 50 years, as well as Cambodia, Laos, Myanmar, and Vietnam whose economies expanded by at least five percent in 20 years.
“While the Philippines did not meet either (criteria), its recent rapid growth could lift it to the ranks of outperformers in the future,” the report read.
It said the Philippines could grow at an average of 5.3% annually from 2015 to 2030, faster than the ASEAN forecast average of 4.1%, and faster than current outperformers, with Vietnam estimated to grow 4.9% annually in 15 years; Malaysia, 4.3%; Indonesia, 4.2%; Thailand, three percent and Singapore, two percent.
Latest state data show that the Philippines’ GDP grew 6.3% last semester versus 6.6% in 2017’s first half.
MGI described the Philippines as a “very recent accelerator”
“After several decades of strong and sustained economic growth, members of the Association of Southeast Asian Nations (ASEAN) make up almost half of the world’s best-performing developing economies. The challenge for the region is to maintain its growth momentum-and continue narrowing the per capita GDP gap with high-income countries-in changing times marked by rapid technological advances and demographic shifts,” it said.
“While people in ASEAN countries have benefited from this economic surge in the form of rising prosperity, income inequality is growing in some countries and will need to be addressed.”
The report found that common characteristics of outperforming countries include a “pro-growth policy agenda of productivity, income and demand that features steps to boost capital accumulation, including forced savings and the growth of financial institutions.”
Large companies also play a “powerful role” in outperforming economies that not only boosted economic output but also “encouraged productivity improvements in small- and mid-sized local suppliers.”
“These firms are not only large but competitive, as the best-performing companies are subject to fierce competition at home. They also support the development of small- and medium-sized enterprises (SMEs) via purchasing and subcontracting, in which business generated by large firms is directly transmitted to smaller firms; large firms in turn benefit from a diversity of suppliers.”
McKinsey said “almost all the growth in the Philippines comes from private-sector conglomerates.”
“The Philippines attracted private investments in three airports by giving private firms a voice in how the facilities will be built and operated,” it noted.
The report also said that demographic change, urbanization and technological disruption will generate growth opportunities in Southeast Asia.
“For the growth momentum to continue, regional policy makers and business leaders will need to focus on three areas: digitally driven productivity, a reinvented labour force, and infrastructure development. These opportunities can support renewed productivity growth,” the report read.
“Big companies can lead this economic transformation by taking risks, responding to disruption and making technological leaps, while midtier firms help diversify ASEAN economies and benefit from the growing consuming class,” it added.
“Governments can support demand, particularly through infrastructure investments. In large countries such as Indonesia, Myanmar, the Philippines and Vietnam, such investments can equalize opportunities in areas still at the periphery of revolutionary changes in transport, technology and supply chains and boost industrial manufacturing where these countries still have room to grow.”
The Philippine government targets infrastructure spending to be equivalent to 7.3% of GDP by 2022 from the actual 5.6% last year.
This, in turn, is meant to drive economic growth rate to 7-8% in 2018 to 2022 from a 6.3-6.5% average in 2010-2016, cut unemployment rate to 3-5% by 2022 — when President Rodrigo R. Duterte ends his six-year term — from 5.5% in 2016 and cut poverty incidence to 14% also by then from 21.6% in 2015.