The uneven growth pace of economies in the world—particularly the country’s top trading and investment partners—remains as one of the major challenges from the external front for the Philippine economy going forward, while the possible effects of El Niño and the lingering infrastructure gap are the challenges seen as growth hurdles on the domestic side.
In its recent publication on economic and financial developments, the Bangko Sentral ng Pilipinas (BSP) cited the challenges that the economy still has to hurdle and the major policy directions from the Philippines’s central monetary authority.
“Looking ahead, one of the major challenges facing the country is the uneven global prospects. The Philippines is monitoring closely countries where investments are coming, trade ties are stronger, workers are deployed to and tourists are expected to come from, such as countries from the Asean, the US, Europe, Japan and China,” the BSP said.
The International Monetary Fund (IMF) recently said the global growth for 2015 is projected at 3.1 percent, 0.3 percentage point lower than in 2014, and 0.2 percentage point below the forecast in July 2015. Prospects across major economies and regions also remain uneven.
In particular, the BSP said the recovery in advanced economies is expected to pick up slightly, while activity in emerging market and developing economies is projected to slow down due to weaker prospects for some large emerging-market economies and oil-exporting countries.
Meanwhile, in the local scene, the BSP said the impact of El Niño and the infrastructure gaps remain as strong headwinds.
In the earlier quarters of the year, the growth of the agriculture sector remained modest on the back of the effects of El Niño, which is hurting farm and fisheries output.
“The need to address infrastructure gaps is a top priority. There are plans to increase spending on infrastructure to 5 percent of GDP by 2016,” the BSP also said.
Despite the challenges, the BSP said the Philippine economy appears to be well placed to deal with challenges—particularly from a slow global economic recovery—given the country’s broad growth drivers.
“From a monetary and financial policy standpoint, the BSP will continue to pay close attention to the outlook for inflation and growth to ensure that monetary-policy settings remain consistent with price and financial stability,” the central bank said.
“The BSP will also help mitigate the adverse impact of capital outflows on the domestic economy by ensuring adequate level of liquidity in the economy and the financial markets during periods of heightened uncertainty and increased risk aversion,” it added. –Bianca Cuaresma, Businessmirror