PHL won’t hit growth goals till 2022, must stop fixation on ‘A’ rating

By Cai Ordinario, Businessmirror, 15 Jan 2020

THE Duterte administration will not be able to hit the growth targets it has set until 2022, which will also prevent it from achieving an “A” credit rating status, according to a local think tank.

First Metro Investment Corp.-University of Asia and the Pacific (FMIC-UA&P) Capital Markets Research expects the country to register growth of below 7 percent until 2022. In 2020, the think tank projects growth to only reach 6.2 to 6.6 percent.

FMIC-UA&P Capital Markets Research economist Victor A. Abola said unless the country sustains a growth of 7 percent in the next three to five years, achieving an A credit rating would be impossible.

“Perhaps, I’m looking at different metrics [but] I don’t think we should, in the time or the foreseeable future, even this administration, even the next one, expect an A rating,” Abola said.

He explained that it took countries like Malaysia years to attain an “A” credit rating while Thailand, whose Gross National Income (GNI) per capita is already double that of the Philippines, has not even attained an A rating.

Given these, Abola said a fixation on attaining an A rating would be a waste of the government’s time. The efforts must be focused instead on activities that would spur economic growth.

These include, he said, efforts to attract more foreign direct investments and boosting the manufacturing sector.

Abola noted that as of September 2019, the country’s FDIs reached $5.1 billion, a contraction of 36.9 percent. Meanwhile, other Asean countries like Vietnam posted FDIs in the level of $25 billion.

Data from the Philippine Statistics Authority (PSA) showed that the country’s manufacturing output has been contracting between December 2018 and November 2019.

“Our energies would be better spent addressing real issues that could accelerate our growth to beyond 7 percent, if not maintain [high economic growth rate],” Abola said.

Growth in 2020

Domestic demand is expected to boost the country’s economic growth this year. The Industry sector is projected to grow 7 percent, while Services will grow faster at 7.1 percent.

Consumer spending will be fueled by low inflation and overseas Filipino workers (OFWs) remittances. Further, the recent increase in job generation will ensure that Filipinos have incomes to spend for various food and nonfood expenses.

Abola noted that the country’s recent economic success of growing the economy above 6 percent already trickled down to poor households, given the lower poverty rate of 16.6 percent in 2018 from 21 percent in 2015.

Apart from these, the government’s infrastructure spending will also boost GDP growth. The government aims to spend 5.7 percent of GDP under its infrastructure catch-up plan. “The Philippine economy will grow faster in 2020 compared to 2019, fueled by stronger consumer spending, easing monetary conditions and growing tourism sector,” First Metro President Rabboni Francis Arjonillo said.