PH economy in 2013: Wins and losses

MANILA, Philippines – The past year was generally a good one for the Philippine economy.

Growth continued to be among the fastest in the region. And the country won investment grade status for the first time – a vote of confidence in a nation once dubbed as the sick man of Asia.

However, challenges remain.

Government data show growth has yet to make a dent on poverty and translate to sustainable, high-quality jobs.

Natural disasters have hit one after another, translating to billions of pesos in losses for the country.

This year, the focus will be on the government’s rehabilitation efforts, which will ensure the economy doesn’t lose momentum and disaster-stricken Filipinos regain their livelihood and avoid falling into poverty.

Below are the biggest stories about the Philippine economy in 2013 – what has been achieved and what else needs to be done.

Impressive growth

The Philippine economy continued its stellar expansion in 2013, buoyed by consumer spending, stronger business confidence, favorable interest rates and high overseas Filipino remittances.

The country grew 7.4% in the first 9 months of the year, making it the fastest-growing in Southeast Asia, and the second in Asia, next to powerhouse China.

Economic managers were confident the economy would beat official targets and grow as much as 7.5% the whole year, but Typhoon Yolanda (Haiyan), one of the world’s strongest typhoons on record, altered this projection.

Yolanda wrought massive destruction in the Visayas, possibly cutting the country’s economic growth by as much 0.8%, the National Economic and Development Authority (NEDA) said.

NEDA said the country could still grow by up to 7%, at the high-end of the 6% to 7% target, in 2013.

Growth, however, may further slow down in the first quarter of 2014 if the government fails to rehabilitate affected areas immediately.

Yolanda’s wrath

Yolanda struck Visayas on November 8, leaving more than 6,000 people dead and close to a million families homeless. Damage caused by the super typhoon was unprecedented – more than P36 billion: P18.3 billion in infrastructure and P18.5 billion in agriculture.

The super typhoon destroyed rice lands in Regions VI, VII, and VIII, prompting the Department of Agriculture to drop its self-sufficiency target for the year.

It also reduced a vast region of coconut farms to wasteland, including Leyte, which accounts for one-third of coconut production in the country.

The Aquino administration earmarked P360.9 billion ($8.17 billion) for rehabilitation and reconstruction efforts in Yolanda-ravaged areas that will take four years to complete. The amount is the highest the country has allotted for such purpose since the end of World War II.

More than 50% of the amount will be used for rebuilding shelter and settlement.

Credit rating upgrades

The Philippines is now among A-lister countries considered safe to invest in after being awarded investment grade status by the three major global credit rating agencies: Fitch, Standard and Poor’s and Moody’s.

The agencies cited improved governance, strong macroeconomic fundamentals and the country’s resilience despite the global economic slowdown as reasons for the upgrades.

The first upgrade came from Fitch on March 27. It was a pleasant surprise, economic managers said, since they predicted the upgrade would happen in the second half of 2013.

The second upgrade came on May 2, from Standard and Poor’s. The Philippine Stock Exchange main index rallied shortly after this, almost breaching the 7,400 mark, the highest level the main index reached last year.

The country finally completed its transformation into investment grade status after Moody’s raised its credit rating on October 3.

The Philippines has come a long way since the time it was referred to as Asia’s sick man for high corruption, worsening poverty and low growth.

The country’s new status is expected to bring in more investments from abroad.

Foreign direct investments in the country increased 10.9% in the first half of 2013, based on the data of United Nations Conference on Trade and Development.

The increase was the second-biggest among Southeast Asian countries, next to Malaysia.

For 2014, the government expects an FDI net inflow of $2.6 billion, 24% more than the expected $2.1 billion by end-2013.

Jump in competitiveness surveys

The Philippines rose 30 notches in the 2014 Doing Business survey released by the International Finance Corporation, the biggest improvement since the annual survey started 12 years ago.

The country ranked 108th out of 189 economies included in the survey that measures how much red tape businesses encounter in dealing with government.

The Philippines also improved its ranking in the Global Competitiveness Index by the World Economic Forum, leaping six places.

The country ranked 59th among 148 countries. It has been a consistent rise for the Philippines – 26 notches up since 2010.

Efforts to improve the country’s rankings will continue in the next years, experts and the government said, as the Philippines aims to be in the upper one-third of both surveys.

Poverty and joblessness

Despite the country’s high economic growth, poverty incidence in the country remained almost unchanged.

The percentage of poor families in the country stood at 19.7% in 2012, compared to the 2009 and 2006 figures of 20.5% and 21%, respectively, according to data released by government in 2013. Poverty statistics come out every three years.

The World Bank estimates that the Philippines needs to create 14.6 million jobs between now and 2016 to achieve inclusive and sustainable economic growth, and make a dent on poverty.

Unemployment among Filipinos is still high at 6.5%, as of the latest survey in October. Of the employed, meanwhile, 53.4% belonged to the services sector and 31.4% to the agriculture sector.

The government has said that joblessness would persist despite high economic growth as the country shifts from a largely agriculture-dependent economy to an industrialized one. – Cherrie Regalado/Rappler.com