THE PHILIPPINES can be expected to close in on the top 10% of the world’s major economies in the next 15 years, partly as improved infrastructure spurs overall economic growth, according to a London-based consultancy.
According to the annual World Economic League Table (WELT) report produced by Centre for Economics and Business Research (CEBR), the Philippines is expected to be the 22nd among 193 major economies by 2033, from 40th this year.
Compared to select peers in Asia, the Philippines will fall below Indonesia’s 12th rank and Thailand’s 21st position in 2033, from those neighbors’ respective 16th and 25th ranks currently.
The Philippines will fare better than Vietnam, which will move up to 30th place by 2033 from 47th spot this year.
“High levels of infrastructure spending together with strong levels of domestic demand from the Philippines’ large and fast-growing population are set to sustain annual growth of around 6.6% per year over the next two years. In the longer term, improvements to infrastructure have the potential to unlock major productivity gains, fuelling annual growth of close to seven percent,” the report said, as it sees the Philippines placing 39th next year, 28th in 2023 and 25th in 2028 before reaching 22nd in 2033.
“It is less reliant on exports than many other countries at a similar level of development,” the consultancy noted in its report.
“This, together with consistently strong levels of domestic demand, has enabled it to sustain positive growth in every year since the turn of the millennium, despite many external shocks such as the 2008 global financial crisis.”
DRIVERS AND RISKS
CEBR expects the Philippines to grow 6.5% in 2018, which would be slower than the 6.7% recorded in 2017, but will sit within the government’s target of 6.5-6.9% for this year.
The consultancy cited the government’s infrastructure drive among the main growth drivers, as well as inflows of foreign direct investments, but flagged a tightening external monetary policy environment and continued elevated inflation as risks.
“The Philippines has long lagged behind competing countries in delivering the infrastructure needed to attract foreign investment and a diverse manufacturing sector. President (Rodrigo R.) Duterte’s ‘Build Build Build’ policy recognizes this issue, and the government plans to raise spending on transport infrastructure from five percent of GDP currently to seven percent of GDP by 2022,” the report read.
“While tax reforms have been implemented to finance this investment drive, much of the funding will also come from overseas,” it added.
“The government has actively promoted this by easing limits on inward investment. With global interest rates on the rise, turning overseas for funding does represent a risk.”
Compared to many others on the list, “the Philippines is better placed than most to manage this risk, with high levels of foreign exchange reserves and only a small current account deficit, which is contained by the regular flows of remittances from overseas Filipino workers,” the report read.
And while “[i]nflation is felt particularly acutely by poorer households, and this represents a risk to growth in the coming years… the government has taken positive steps to tackle this issue by easing limits on food imports and lifting non-tariff barriers,” it added, noting that the central bank has raised rates by a total of 175 basis points this year “in order to stop the economy from overheating.”
The top four spots this year and in 2019 will be occupied, in descending order, by the United States, China, Japan and Germany. The United Kingdom, fifth this year, will slide to seventh place, while France will retain sixth rank. India, seventh this year, will unseat UK to grab fifth in 2019, while Italy, Brazil and Canada will retain eighth, ninth and 10th places, respectively. — Elijah Joseph C. Tubayan