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RP
registers highest growth among Southeast
Asian middle income countries
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East
Asian economies are likely to remain
robust in 2008 despite growing concerns
about the U.S. sub-prime crisis and
increasing global oil prices, says
the World Bank’s latest East
Asia and Pacific Update. The Philippines
registered a GDP growth of 7.3 percent
in the first half of 2007, while GNP
growth reached 8 percent, making it
the best performing economy among Southeast
Asian middle income countries. This
indicates that GDP growth for the year
could reach or exceed 6.7 percent,
which is on the upper end of the Government’s
target range for 2007.
The
Update, a six-monthly report on the region’s
economic and social health, finds that growth
in emerging East Asia is expected to exceed 8
percent in 2007 for a second year in a row and
to moderate only slightly in 2008. Emerging East
Asia is Developing East Asian countries like
China, Indonesia, Malaysia, Philippines, Thailand,
Vietnam and some smaller economies and four Newly
Industrialized Economies or NIE such as Hong
Kong, Korea, Singapore and Taiwan, China.
Although
East Asian exports to the U.S. have already
slowed, more buoyant investment and consumption
in China and other countries have allowed
growth to remain strong and even pick up
this year.
“High
GDP growth, reduced public debt, a balance
of payment surplus, falling interest rates,
recovering financial markets and high remittance
levels by overseas Filipino workers have
combined to bring about the highest economic
growth achieved by the Philippines in 20
years,” said Vera Songwe, World Bank
Philippines Senior Economist. “The
sustained good performance on tax administration
remains critical to sustaining this positive
environment,” she added.
Maryse
Gautier, Acting Country Director for the
World Bank in the Philippines, said, “The
Philippines has demonstrated its ability
to perform at par with or better than its
regional neighbors on the economic front
in recent years. The challenge moving forward
is to accelerate the pace of reducing poverty,
delivering social services to the poor, and
attracting more job-creating investments.”
While
poverty levels have declined overall, it
has also increasingly become more urbanized.
Recent studies show that the Philippines
urbanized rapidly, with only 38 percent of
the population in rural areas by 2004, compared
with 62 percent in 1984. Labor moved out
of agriculture largely through urban migration.
One-dollar-a-day poverty declined to 13.5
percent in 2004.
Fiscal
adjustment of some 5 percent of GDP in 2005-07
has alleviated the perennial investor concern
about fiscal sustainability. By October,
financial markets had largely recovered from
the subprime crisis-induced volatility in
the U.S., notwithstanding a spate of corruption
scandals featuring prominently on the political
landscape.
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While
the country’s economic growth is at
its highest in 20 years, ‘the challenge
is to accelerate the pace of reducing poverty.’
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The
services sector, which accounts for more than
half of GDP, led the growth with 8.6 percent.
Industrial growth also increased, driven by
mining and construction, although expansion
in manufacturing and agriculture slowed (relative
to the first half of 2006), limiting the impact
of the higher growth on employment.
Personal
consumption, benefiting from growing remittances,
expanded by 6 percent. In contrast to previous
years, government consumption increased as
a share of GDP. Unemployment fell to 7.8
percent from 8.1 percent in 2006, and underemployment
fell to 22 percent from 23.5 percent in 2006,
according to the July round of the labor
force survey.
The
consolidated public sector deficit was eliminated
in 2006, and a P32 billion consolidated public
sector surplus, about 1 percent of GDP, was
recorded in the first half of 2007. The National
Government deficit through September fell
to P40 billion versus a targeted P54 billion,
and appears on track to remain below the
annual target of P63 billion (0.9 percent
of GDP). Public expenditure has increased
in real terms.
By
October, the stock market index, which lost
24 percent of its value in July-August, among
the highest drops in East Asia, had recovered
all its losses by early October and reached
a new high soon thereafter. But it still
faces turbulence.
Gross
international reserves reached $32.4 billion
in October, up from $23 billion at end-2006,
reflecting rising surpluses on both current
and capital accounts. Trade in both directions,
however, slowed to below 5 percent for exports
through August and below 4 percent for imports.
The appreciation of the peso by about 20
percent against the US dollar over two years
and the prospect of slower OECD growth, have
raised some concern about prospective export
growth.
Net
foreign direct investment reached $1.6 billion
in the first seven months of the year, an
increase of 70 percent. Net portfolio inflows
jumped 143 percent to $3.4 billion as of
September despite a spike in outflows in
August to a quarter of a billion. Almost
90 percent of portfolio flows went to the
stock market with the balance invested in
government securities.
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