Philippines will be a trillion-dollar club member

BY

NIGHT OWL

Anna Mae Yu Lamentillo Anna Mae Yu Lamentillo

The economy of the Philippines is the world's 28th largest economy by GDP (Purchasing Power Parity) according to the 2018 estimate of the International Monetary Fund. Under the administration of President Rodrigo Duterte, Philippines recorded a GDP (PPP) of 956 billion in 2018. If the Philippines is able to maintain its projected GDP Growth of 6.5% in the next decade, then the tiger cub economy might well be part  of the trillion-dollar club, which currently includes United States, China, India, Japan, Germany, Russia, Indonesia, Brazil, United Kingdom, France, Mexico, Italy, Turkey, Korea, Spain, Saudi Arabia, and Canada.

In a report titled “Philippines Tiger Economy Still Set for Dynamic Growth,” IHS Markit Asia-Pacific chief economist Rajiv Biswas predicts that in 2022, the country will reach the upper middle-income status as robust economic growth trickles down to household incomes. It noted that the Philippine economy is poised to double by 2026 en route to a GDP $1 trillion by 2032. The trickling-down effect seem to have started already. According to the Philippine Statistics Authority (PSA), poverty incidence among Filipinos has decreased by 6.6 percentage points, from 27.6 percent during the first half of 2015 to 21 percent during the first half of 2018. In a report of the National Economic and Development Authority (NEDA), it noted that the average income has accelerated from 15.3 percent to 21.2 percent.

According to NEDA Undersecretary Adoracion Navarro, the growth in per capita income of the bottom 30 percent of households picked up significantly to 29.2 percent in the 2015-2018 period from only 20.6 percent in the 2012-2015 period. This implies an increase in real incomes of the poor, which has helped in reducing poverty among Filipino families and individuals.

Highest credit rating

The World Economic Forum also noted Philippines as among economies which show potential on Intergenerational Equity and Sustainability. This April 30, the country also received its highest credit rating from international debt watcher S&P Global Ratings. S&P upgraded the Philippines’ long-term sovereign credit rating  from “BBB” to “BBB+” — two notches above investment grade rating — with a “stable” outlook.

While IMF had previously cautioned about the rising inflation in 2018 as a possible roadblock, this problem seems no longer an issue today. In fact, Asian Development Bank predicted inflation to decline at 3.8% in 2019 and 3.5% in 2020. It also forecasted per capita GDP Growth to rise at 4.8% in 2019 and 2020.

Scaling up public investment

In its economic assessment published in 2018, IMF highlighted the need to scale up public investment in the Philippines if it is to sustain long-term growth and reduce poverty. It said that public investment, if well managed and targeted, can help boost overall productivity, stimulate private investment, and reduce poverty by creating jobs. According to the IMF Investment and Capital Stock Dataset, Philippines was only spending 3.9% of its GDP on public investment in 2015. This is far lower when compared to neighboring countries like China (13.5%), Malaysia (9.2%), Vietnam (6.9%), Thailand (6.2%), and India (5.9%).

‘Build, Build, Build’

The “Build, Build, Build” program is the Duterte administration’s medium-term goal to increase infrastructure spending from 5.4 percent of the country’s Gross Domestic Product (GDP) in 2017, to 7.3 percent by the end of 2022. This is higher than the 2.4 percent average recorded by the past six administrations in the last five decades — and the highest budget allocation for infrastructure in Philippine history.

Under the administration of President Rodrigo Roa Duterte, Department of Public Works and Highways  (DPWH) Secretary Mark Villar said the agency has built a total of 6,157 km of roads, 2,403 bridges, and 3066 flood mitigation structures since assuming the post in July, 2016.

Mega-bridge project

One of the landmark project of the Build Build Build is the Mega Bridge Program, a masterplan which lays the foundation for a series of short and long-span bridges linking island provinces to eventually connect Mindanao and Visayas to Luzon via land travel.

According to DPWH Secretary Villar, the first project under the master plan — the Panguil Bay Bridge, a 3.7-km bridge connecting Tangub City in Misamis Occidental and Tubod in Lanao del Norte, has already started last November 2018. Once completed in 2021, travel time between Tangub and Tubod will be reduced from 2.5 hours to only 10 minutes. It will also shorten travel time between Ozamiz City in Misamis Occidental and Mukas, Kolambugan, in Lanao del Norte from 2.5 hours (using RORO operations) to only 20 minutes.

Detailed Eengineering designs of the Guicam Bridge in Zamboanga Sibugay and three bridges in Tawi-Tawi (Nalil-Sikkiat Bridge, Tongsinah-Paniongan Bridge and Malassa-Lupa Pula Bridge) are also included in the Improving Growth Corridors in Mindanao Road Sector Project (IGCMRSP) under the Asian Development Bank.

Six bridges are now undergoing feasibility studies: (1) the Bohol - Leyte Link Bridge, a 22-km bridge, which will shorten travel time from Bohol and Leyte provinces from three hours to only 40 minutes, (2) the Negros – Cebu Link Bridge, a 5.5-km bridge that will reduce travel time from Negros and Cebu from 40 minutes to ten minutes , (3) Cebu-Bohol Link Bridge, a 24.5 km bridge that will reduce travel time from 2 hours and 10 minutes to only 30 minuses, (4) the Luzon Sorsogon-Samar Bridge Link Bridge, an 18.2-km bridge connecting the island of Samar in Eastern Visayas to the main island of Allen-Matnog, (5) the Samal Island- Davao City Connector Bridge, a 2.85-kilometer bridge connecting Samal Circumferential Road to Davao City, and (6) the Bataan-Cavite Interlink Bridge - a 31-kilometer inter island bridge connecting Mariveles in Bataan to Corregidor to Naic in Cavite.