Business Consulting BlogNewsEconomic growth is upon the Philippines, but how optimistic can we be?

May 11, 20150
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Last January, the World Bank group shared its economic growth forecast for the Philippines. In line with last year’s boost, the Philippine economy is expected to grow by 6.5% in 2015.

The Philippine government, however, has higher expectations for the country’s economic trajectory, predicting an economic growth of 7% to 8% for 2015 and 2016. But the government’s overly optimistic projections have often missed the mark.

If the Philippines succeeds, the archipelago will be behind Myanmar (8.5%), Cambodia (6.9%) and Timor-Leste (6.8%), but will have a stronger economic growth when compared to Laos (6.4%), Vietnam (6%), Indonesia, Malaysia and Thailand.

While this is a great momentum for the Philippines economy, the World Bank warns that such economic growth will be dependent on the government’s ability to remain committed to its spending plans. Last year, overall government expenses were 13% lower than anticipated. This is a recurrent problem that has a negative impact on the economy.

In order to keep the economic growth above 6%, public spending must increase. The government agencies must improve their capacity to spend as it will ultimately result in general growth as well as poverty reduction.

The usual risks that the Philippines are facing and that might negatively impact their economy are well known and must be improved:

Government does not follow its plan due to delays in planned execution of budget
Delays in investment
Persistent corruption
Lack of infrastructure
The Philippine government has recently identified the specific industries where increased public investment and private investment will be key to achieve to achieving inclusive economic growth: infrastructure, Business Process Outsourcing, education and health. This is in addition to a sustained inflow of remittances from Overseas Foreign Workers.

But such ambitious goals will have to be accompanied by major reforms, such as the simplification of the business registration process or structural tax reforms.

Nicolas Fauchille
Account Executive

12F Sagittarius Building, 111, H.V. Dela Costa Street
Salcedo Village, Makati City 1227
T: +632 856 9631
E: nfauchille@tripleiconsulting.com; W: https://www.tripleiconsulting.com

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