OECD cuts 2018, 2019 growth forecasts for PHL
By Elijah Joseph C. Tubayan, Reporter
THE Organisation for Economic Co-operation and Development (OECD) has adjusted downward its economic growth forecast for the Philippines this year and in 2019, though the economy is still expected to sustain its “good performance” over the next five years.
The OECD expects the Philippine economy to grow 6.4% and 6.5% in 2018 and 2019 respectively, from the 6.7% previously estimated for both years, based on the Economic Outlook for Southeast Asia, China and India 2019 report published on Monday, which focused on “Smart Urban Transportation.
If the forecasts pan out they would be weaker than the 6.7% growth posted in 2017.
After adjustments were made for the slowdown in the second quarter amid high inflation, the OECD said that the Philippines’ economic growth is still strong.
“In general, Asia is the fastest growing economy in the world…So, in general, these are the best results in the world now. When it comes to Asia and ASEAN-5 (Association of Southeast Asian Nations) countries, the growth is good and maybe they are particularly good and particular for the Philippines and Vietnam, we consider it as a good performance,” said Mario Pezzini, director of the OECD Development Center, in a phone interview yesterday.
Inflation in October was at a nine-year high of 6.7%, with the year-to-date average at 5.1% — above the central bank’s 2-4% target, which was mainly due to high fuel prices, rice shortages, among other food supply issues, the weak peso, and higher excise taxes introduced in January.
The report also noted the effects of typhoon Ompong (international name: Mangkhut) in September, where the “second-round effects of the disaster on prices could be detrimental, given that the country was already struggling with high inflation in July and August 2018.”
“The high economic costs of disasters takes the form of damage to infrastructure, physical capital, inventories, agricultural and natural resources and the disruption of normal economic activity.”
The Philippines is forecast to be the second-fastest growing economy in the ASEAN-5, just below Vietnam’s 6.9% and 6.7% for 2018 and 2019, respectively. However Cambodia, Laos, and Myanmar are expected to grow faster when they are included.
The Philippines is also above the ASEAN-10 average forecast of 5.3% and 5.2% for both years. Although the country is below the emerging Asia average estimate of 6.6% for this year, it will be above the region’s 6.3% estimate for 2019.
OECD’s growth forecasts are lower than the World Bank and International Monetary Fund’s 6.5% and 6.7% for 2018 and 2019, respectively, and the Asian Development Bank’s 6.4% and 6.7%. The government meanwhile targets a 6.5-6.9% economic growth rate for 2018 and 7-8% for 2019 to 2022.
For 2019-2023, the OECD expects the economy to grow an average of 6.6%, level with the 2012-2016 average.
The OECD said that “[o]verseas remittances will still be an important component of private consumption.”
“The underemployment rate, which has recently risen again despite the decline in the labor participation rate, requires attention. Robust public budgetary spending should help buoy the economy, albeit the quality of spending can still be improved,” it added.
It also noted that “the pace of delivery of infrastructure projects before the national elections in 2022 will be crucial for the momentum of investment.”
It also said that the signing of the Ease of Doing Business Law in May is expected to improve investment competitiveness.
It said flexible work arrangements provided for by the Telecommuting Act approved by the House of Representatives in May are expected to reduce road congestion . The OECD said that Manila had the second-most hours lost per worker per year due to congestion among selected Asian countries at 233.6, just below Shanghai’s 264.
“Forms of FWA relevant to managing transportation demand include flexibility in setting work-day start and end times, part-time work, compressed work weeks, telecommuting and working from home, and job sharing,” it said.
It also noted that the Philippines’ policy challenge for 2019 is the risks posed by job automation on the business process outsourcing industry.
“While the information technology and business-process management sector has contributed significantly to employment in the Philippines, automation is likely to affect job creation in the sector in the future. Although the ultimate extent of effects of automation on total employment are unclear, automation may reduce demand for outsourcing of business functions and could increase the focus on innovation and creativity,” the OECD said.
“Most employment in the sector in the Philippines is concentrated on the management of customer relationships, which tend to be susceptible to automation, although employment has remained robust thus far. Efforts are being made to raise skill levels in the sector, but scope remains ample for policy support; existing programmes can be expanded, funding allocated more efficiently, reforms made to formal education and infrastructure quality upgraded,” it added.