Statement of Economic Planning Secretary Arsenio Balisacan during the 2014 Year-end Media Briefing
[Delivered at the NEDA Executive Lounge, Pasig City, on December 17, 2014]
To our friends from the media, colleagues in government, ladies and gentlemen, good afternoon.
On behalf of NEDA, I would like to thank you all for taking time to join us today as we conclude another year of milestones and challenges. Considering our constant battle with climate-related disasters, along with the uncertainties in the global economy, we can say that the Philippine government has remained resolute in its stance to strengthen the foundations for sustained and inclusive growth through wide-ranging reforms in governance and the economy. We are aware that the road to inclusive growth is filled with obstacles and we need to continue our journey, even with extreme weather, so we can move closer to our destination.
Let me now discuss in brief our country’s economic and development story for 2014.
For the first three quarters of this year, the economy grew at an average of 5.8 percent. While this falls below our target of at least 6.5 percent, the Philippine economy remains among the brightest spots in the region.
Economic growth has been predominantly private sector-led, as it should be, indicating increased economic activity in sectors where there are opportunities for better employment. On the other hand, government spending for the year was restrained and thus held back growth. Nonetheless, there is reason to believe that the recent growth slowdown is merely transitory and part of the adjustment process associated with the recent reforms in public financial management.
There are bright prospects to look forward to as the year ends. Our macroeconomic fundamentals remain strong. The latest business expectations outlook from the Bangko Sentral ng Pilipinas shows a more buoyant fourth quarter, with more firms optimistic about the country’s economic prospects. Export performance in 2014 has been notable, especially for high-value products, and this bodes well for the economy as a whole. The growing household consumption indicates greater consumer confidence, which could boost growth. For eight quarters now, since the second half of 2012, growth of the industry sector has outpaced that of the services sector. This is consistent with our strategy to promote the resurgence of industry and the manufacturing subsector, in particular. The services sector continues to be robust, especially the IT-BPM. We also saw the tourism subsectors recovering from the temporary setback brought about by the natural calamities that hit our country late last year. The target of 6.8 million international tourist arrivals for 2014 will likely be met.
The Business Expectations Survey of the BSP also shows continued business confidence. This has translated into higher investments and investment commitments. Net foreign direct investments (which account for the actual flow of foreign investments) for the first nine months of the year grew by 61.3 percent. Meanwhile, total approved investments for the first semester of 2014 grew by 11 percent. For the full year, the target is 8 percent.
Employment and Poverty
With respect to employment generation, the latest round of the Labor Force Survey shows the unemployment rate at a 10-year record low of 6.0 percent. The employment figures also suggest that establishment-based jobs involving mostly full-time work were generated. However, underemployment remains a major challenge, as more than seven million employed Filipinos still desire to work additional hours, an indication of inadequate incomes.
In terms of poverty reduction, we are confident that, with our strategy of promoting rapid growth while implementing targeted programs to equalize opportunities, we will achieve the targets we have laid down in the PDP Midterm Update. Data from the Philippine Statistical Authority show that poverty went down to 24.9 percent in the first semester of 2013, from 27.9 percent in the same period in 2012. During the same period, the subsistence incidence, or the proportion of extremely poor Filipino families or individuals who could not afford to meet their basic food requirements, decreased to 7.7 percent among Filipino families and 10.7 percent among Filipinos.
This year, the Pantawid Pamilyang Pilipino Program or 4Ps was expanded to cover 15- to 18- year-old children who are in school. As of September 30, 2014, the 4Ps cover a total of 4.3 million households from 1 million in 2010. Of this figure, 4.2 million are covered by the regular 4Ps while the Modified Conditional Cash Transfer or MCCT covers about 153 thousand households. The MCCT beneficiaries are homeless and street families and IP households in the geographically isolated and disadvantaged areas who are not covered by the regular CCT.
Economic Outlook for 2015
Moving into 2015, we know that we need to work even harder to sustain economic growth over the short term. Our wider fiscal space due to the country’s continuous rise in competitiveness ranking and investment grade ratings should allow us to accelerate implementation of infrastructure projects, particularly those that will address transport and logistical challenges to facilitate movement of people and goods. Building on our transport roadmap for Metro Manila and nearby regions, we are now working on more comprehensive master plans to develop the other regions in the country.
We will also take advantage of the opportunities presented by the country’s hosting of APEC and the implementation of the ASEAN Economic Community by the end of 2015.
The 2015 budget is consistent with the sectoral and spatial strategies indicated in the PDP Midterm Update. The priority sectors have been identified based on their potential for rapid growth and/or massive generation of quality employment. These are agri-business, manufacturing, construction, IT-BPM in the Next Wave Cities, logistics and tourism. The objective is to improve competitiveness in the production sectors while ensuring that there is ample supply of the needed skills. The spatial strategies, on the other hand, are intended to deliberately address the constraints being faced by the poor in these areas. In Category 1 provinces which have the highest number of poor families, priority will be given to streamlining government procedures concerning business to encourage more investments and enhancing skills training and employment facilitation to address the job-skills mismatch. In Category 2 provinces where there is a high proportion of poor individuals relative to the population, the focus will be on promoting economic mobility including physical connectivity, human capital development and linking producers to the supply chain. Peace efforts will continue to be pursued as well. In Category 3 provinces which are exposed to natural hazards, the goal is to build up resilience through income diversification, income protection including insurance, and most importantly, disaster preparedness.
The reconstruction and rehabilitation of Yolanda-affected areas, as contained in the Comprehensive Rehabilitation and Recovery Plan or CRRP is expected to spur investment and provide livelihood and employment opportunities. The CRRP outlines the National Government’s plans for the recovery of the 171 affected cities and municipalities in 14 provinces and six regions (collectively known as the ‘Yolanda corridor’). Under the CRRP, resettlement projects account for the biggest slice of the proposed budget at P75.67 billion. The Department of Budget and Management has already released P51.98 billion from the national budget for the rehabilitation plan in the Yolanda corridor since November 2013.
Needless to say, the government continues to be vigilant on the possible risks that the country might face. The threat of natural calamities such as drought, earthquakes and typhoons have been a recurring challenge for both the government and the citizenry. But as proven by our experience in the recent Typhoon Hagupit, we have certainly improved in our disaster response and adaptation systems through better preparedness and faster response mechanisms. These disaster risk reduction and management interventions will be pursued and continuously improved upon to mitigate the loss of output, destruction of property and infrastructure, and human lives.
The government will also continue its governance reform program and ensure that the gains will be sustained even beyond the term of President Aquino. We are always reminded of the catalytic role that government is supposed to play in promoting inclusive growth. For this, we will continue to implement measures to enhance revenue generation, regulatory efficiency, improve the links between planning, investment programming and budgeting, and build capabilities on planning, investment programming, budgeting and budget execution.
As I’ve mentioned many times before, the Philippine economy should consistently grow at a rapid pace over a longer period of time in order to effectively solve the poverty problem. Moreover, we need to be mindful that there are no quick fixes for long-standing problems; they require long-lasting solutions. The challenges we face are complex and thus require a high degree of cooperation and coordination within government and among development partners, private sector and citizens.
Along this line, I call on everyone to give their support and work with the government in sustaining and strengthening the reforms that have been started and that have already started to produce tangible results. As we sprint towards 2016, let us not allow ourselves to be sidetracked.
On this note, we wish everyone a Merry Christmas and a bountiful 2015! Thank you.
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