PH named among ‘most promising’ countries

Citigroup notes potential high growth rate

MANILA, Philippines—Global banking giant Citigroup has identified the Philippines as one of 11 countries that will likely stand out in a globally integrated economy in terms of high growth rates and investment returns over the next 40 years.

Citi, in a global economic research dated February 21 titled “Global Growth Generators (3G),” introduced the concept of 3G to refer to countries, regions, cities, trade corridors, sectors, industries, firms, technologies, products and asset classes that over the next five, 10, 20 and 40 years could deliver high growth and profitable investment opportunities.

The 3G index takes into account several components including domestic saving investment, demographic prospects, health, education, quality of institutions and policies and trade openness.

The countries that scored highest in the 3G index in terms of growth potential are Bangladesh, China, Egypt, India, Indonesia, Iraq, Mongolia, Nigeria, the Philippines, Sri Lanka and Vietnam.

In the research written by Citi global economists Willem Buiter and Ebrahim Rahbari, Vietnam had the highest index score at 0.86, followed by China (0.81), India (0.71), Indonesia (0.70), Mongolia (0.63) and the Philippines (0.60).

The study projected a 5.5 percent annual per capita gross domestic product (GDP) growth for the Philippines between 2010 and 2050. At $3,684, or 8.3 percent of the US level, the Philippines’ level of real GDP per capita puts it in 52nd place in its sample.

The country’s population was projected to grow from 93.6 million in 2010 to 146.2 million in 2050. Its population of working age is also projected to grow by 66.2 percent over that period.

The Citi research also noted that the Philippines’ reported investment rate was “unbelievably” low at 14.5 percent of GDP for the period 2006-2009.

“Even if the data understate the true investment rate, there can be little doubt that the investment rate will have to be raised substantially if the projected growth rates are to materialize,” the research said.

The Philippines scored “quite well” on the 3G index with a value of 0.60, the research added.

Investment in education and health should help it improve its score and its growth prospects, while institutional quality, which also pulled down its 3G index score, should be raised next, the research said.

“Unlike Indonesia, which is often mentioned as one of the potential new tiger economies, the Philippines barely get a mention. This seems strange. After all, in terms of governance, institutional quality and human capital there is not much to choose between the two, and unlike Indonesia, the Philippines already managed a respectable growth rate without the access to easy (measured) growth provided by oil, natural gas and other non-renewable resource extraction,” the study said.

“With the Philippines safe from the natural resource curse, its prospects for improving institutional capacity would seem to be at least as good as those in Indonesia,” it said.

The research also noted the country’s widely dispersed “diaspora” sending home remittances and establishing personal, professional and commercial contacts, links and networks in turn seen benefiting the country in the future.

Material governance and institutional reform were cited as necessary for the Philippines to join the Asian Tigers, including a movement of the state bureaucracies into the right direction.

“But such reforms have been shown to be feasible in other countries starting from no more favorable conditions. We are hopeful that the Philippines will track our forecast,” the research said.

For poor countries with large young populations that were cited in the 3G index, the research said growing fast should be easy by opening up, creating some form of market economy and investing in human and physical capital.

“Don’t be unlucky and don’t blow it. Catch-up and convergence should do the rest,” it said. –Doris Dumlao, Philippine Daily Inquirer