The incoming Marcos administration is encouraged to continue President Rodrigo Duterte’s focus on infrastructure projects and to pursue game-changing policies to attract more investments into the country.
In separate commentaries, both the Department of Finance (DOF) and Moody’s Analytics made the call for an infrastructure development-heavy regime under President-elect Ferdinand Marcos Jr.
“Amid external economic headwinds, the next administration should continue and build on the reform momentum to encourage both investment- and export-led growth,” said DOF Chief Economist Gil S. Beltran on Wednesday, June 22. He is also the president of the Philippine Tax Academy and a former DOF undersecretary.
Moody’s in its latest “APAC Outlook” report cited the Philippines, along with Malaysia, as the two nations in Southeast Asia that reported a strong GDP outlook after a first-quarter growth that was “much stronger than expected.” For the Philippines, this was 8.3 percent GDP growth as of end-March.
“Policy statements from President-elect Ferdinand Marcos Jr. indicate that infrastructure investment will accelerate as the focus returns to the ‘Build, Build, Build’ policies of the Duterte administration,” noted Moody’s. It also commented that domestic consumption growth has accelerated faster than expected with the easing of social distancing rules. “Further, exports have been supportive as elsewhere in the region,” it added.
In the DOF’s own economic bulletin where it highlighted on the country’s foreign direct investments (FDI), Beltran said the “sustained inflows of foreign investments bring in more dynamism to the economy and provide competition to local players not only in terms of product or service quality, but also in terms of attracting workers.”
What will help improve FDI flows more are the structural reforms, he added. These include the recently passed amendments to the Retail Trade Liberalization Act, to the Foreign Investment Act, and to the Public Service Act.
“(All these) will improve the country’s investment climate, encourage more investments into the country, and support investment-led growth,” said Beltran.
As of end-March, the country’s net FDI inflows rose by two percent to $2.44 billion, based on Bangko Sentral ng Pilipinas (BSP) data.
For the month of March only, FDI net inflows were lower by 9.8 percent to $727 million from March 2021’s $893 million with investors still concerned about the long-term impact of the Russia-Ukraine conflict on both global and domestic growth, and the inflation outlook.
But, the BSP said that despite the decline in the March data, the first quarter numbers were positive due to higher net inflows from intercompany borrowing/lending between foreign direct investors and their subsidiaries which continued to make up for the lower net inflows from new equity and reinvested earnings.
The BSP is projecting FDI net inflows to reach $11 billion by end-2022 and $12 billion next year. In 2021, FDI net inflows increased to an all-time high of $10.52 billion.
Under the Duterte government, infrastructure spending went above five percent of GDP and Beltran said this should also enhance growth in private investment.
In a previous DOF bulletin, Beltran said that based on a 20-year spanning data, for every percentage point of GDP that public construction increases, the private investment also rises by 1.34 percentage points of GDP. “(This has) a three-year lag and 2.03 percentage points of GDP with four to six years’ lag,” said Beltran.