PH a tiger economy in 2020?

DEVELOPMENT Bank of Singapore (DBS) projects the Philippine economy will expand by more than third in less than a decade when the reforms introduced by the present government bear fruits.

In a report “Asia 2020,” the Singapore-based DBS said the economy should trend toward 6 percent by 2020 on the back of savings and investment that continue to rise back toward longer-term averages.

“We hold a cautiously optimistic view of the economy and expect reform to proceed at a moderate rate. By 2020, GDP [in today’s dollars] will likely be 80 percent larger and income levels 45 percent higher than at present,” DBS said.

It lauded the Aquino administration’s effort in prudent spending which drove savings rate to grow by 18 percent from 11 percent in 2004, while noting that investment is “beginning to follow path.”

“The current government has thus far done a credible job in introducing reforms centered on government finances and private-public investment partnership. It also has focused its attention on population management and reforms aimed at lowering corruption. GDP should follow from there. Reform is key and progress is being made,” DBS said.

According to Asia’s biggest lender, fiscal reforms “are starting to bear fruits” and efforts to increase investment are noteworthy.

“Since a more stringent standard for transparency and accountability was put in place in [this year], the country’s budget deficit has narrowed sharply in the first half. This complements the budget consolidation trend since the early 2000s and fiscal concern is increasingly less of a concern,” DBS said.

It also noted that the introduction of new structure for project approvals and implementation, coupled with measures to counter corruption, should complement PPP projects and raise investor confidence.

“In short, the reform momentum is building, and this should translate into greater foreign direct investment inflows and complement the rising domestic savings rate already apparent,” DBS said.
Demographic is favorable to Philippines, DBS said, but the still-high birth rate will remain a challenge.

It added that if the government’s pro-contraceptive stance become a success, “the demographic outcome could mean an upside surprise to the growth outlook.”

“To some extent, resources have been spent accommodating a rise in population at the expense of other investment and this may have impeded GDP growth in the past. Over the coming decade, economic growth will be respectable with much depending on policy and whether that large labor pool and resource endowment can be effectively tapped upon,” DBS said. –Lailany P. Gomez, Manila Times