Moody’s Analytics says PHL is ‘Asia’s rising star’

(Updated 4:30 p.m.) Philippine output this year and the next is seen settling within the government’s growth goals, driven by the construction and business process outsourcing sectors and domestic demand, a unit of debt watcher Moody’s Investors Service said Wednesday.

“We expect GDP (gross domestic product) growth to remain in the 6.5 to 7 percent range in 2013 and 2014, making the Philippines one of the world’s fastest-growing economies,” Moody’s Analytics noted in the report “Philippines Outlook: Asia’s Rising Star.”

The expectations matches the Philippine government’s growth goal of 6 to 7 percent this year and 6.5 to 7.5 percent next year.

Noting the stellar 6.6 percent pace of output the Philippine posted in 2012, Moody’s Analytics said the “impressive rate of GDP growth looks sustainable, as risks are low and most sectors of the economy are growing solidly,” adding that “construction and business process outsourcing” will remain key growth drivers.

It noted that all other demand components are “robust.”

“The Philippines’ recent performance against a weak global backdrop shows that good governance is far and away the most important driver of growth in emerging markets,” the report read.

Moody’s Analytics, however, pointed out some stumbling blocks to much-needed investments that could create more jobs.

“Still, the biggest risk for Philippine investment is operational,” the report read, referring to “complicated and changeable” regulations and taxes.

It noted the Philippines ranked 138th in the World Bank’s Ease of Doing Business Index, shared alongside Sierra Leone but below India—a main competitor in BPO sector.

“If the government wants to attract more foreign investment, it must ease its restrictions on foreign ownership and streamline the rules for starting businesses, paying taxes, and dealing with workers,” Moody’s Analytics noted.

Given the higher growth trajectory of the economy, Moody’s Analytics said if reforms continue, it may grow toward a rate of 8 percent by 2016.

It, however, said, “This is far from assured, however, and much will depend on how smoothly the transition goes when President Aquino steps down in 2016.”

Sought for comment, Bank of the Philippine Islands economist Emilio Neri Jr. agreed with Moody’s Analytics.

“I wouldn’t really disagree with their findings for this year and the next,” he said, adding that only contracting exports revenue for the first two months pose a big threat to the economy.

But Neri said achieving 8-percent growth by 2016 will be hard, as “agricultural and manufacturing sectors do not exhibit substantial improvements,” resulting in poverty numbers unchanged in the past six years.

“We can’t rely on remittance funds and BPOs to bring us to rapid growth. Consumption can’t bring us to that pace if the number of poor remains high,” he said.

Despite the strong growth, the Philippine government has been criticized by local and foreign economists for failing to address poverty and joblessness.

On March 27, Fitch Ratings gave the Philippines it first ever investment grade rating, with the caveat that efforts to address structural problems and reduce poverty must not lose steam.

Following the release of poverty statistics on Tuesday, economic managers vowed to focus on achieving a more inclusive growth, increasing spending in social programs like conditional cash transfers and building more schools and health facilities. — VS/BM, GMA News