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Four ‘tailwind’ conditions to keep economy stable

Mindanao growth, Asean integration factors to help country remain afloat
By: - Senior Reporter / @agarciayapCDN
/ 07:44 AM July 29, 2013

As major economies are still recovering from the global economic crisis, the Bangko Sentral ng Pilipinas (BSP) is optimistic that four major “tailwind” conditions will keep the country’s economy stable.

Dr. Ma. Almasara Cyd N. Tuano-Amador, BSP assistant governor for monetary policy sub-sector, said that these conditions will help the country remain  resilient from the external global factors that may shake the local economy.

“Our economy seems to be on a “surer” footing with prudent monetary policy put in place, favorable external payments with a reserve that can afford to pay for our country’s imports for almost a year, more foreign assets than liabilities, sound banking systems, inflation rates at bay. We have ample fiscal space that will allow our government to infrastructure and other critical social economic priorities,” said Amador at the economic briefing at the Marco Polo Plaza last Friday.

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main factors

Aside from this positive fiscal policies and conditions, Amador said the BSP is pinning its hopes on four main factors or “tailwinds” that will fuel more growth for the country’s economy.

Amador said these are demographic dynamics, huge potential for growth in Mindanao, Asean (Association of Southeast Asian Nations) integration, and a buoyant business confidence and consumer sentiment.

“The Philippines has the youngest population in Asia that will support strong growth outlook when married with opportunities,” said Amador.

Based on population statistics, Amador said that the median age in the country is 22.2 years old, which is expected to reach its “sweet spot” by 2015 or that time when a proportion of the population is dominated by the working-age group.

She added that once this favorable demographics is coupled with opportunities like job availability, then the country can expect an average growth rate of 7.3 percent over a 10-year period starting 2015.

Further development of Mindanao also presents a lot of opportunities for growth in the country, Amador said.

“Mindanao as a consumer and producer has a lot of promise. Tourism, agriculture, Halal food production and mining projects have huge potentials,” she said.

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Another promising condition is the integration of all 10 member countries of the Asean, which are the Philippines, Indonesia, Malaysia, Singapore, Thailand, Brunei, Burma, Cambodia, Laos and Vietnam, by 2015 through the Asean Economic Community 2015.

According to Amador, the integration would mean an expanded market base for the country especially as trade within the member countries has grown by 20 percent in the last two years—higher than our trading with the United States and Japan.

The last favorable factor is the positive image of the country to the global investment community.

“Now we are at record high on business confidence, sentiment is very positive with strong consumer and investor morale that’s good for business,” Amador said.

All the positive ratings from third party organizations will add to the attractiveness of the country to foreign direct investments that can help create more jobs for the Filipinos.

Headwinds

Amador, however, said that these favorable conditions can still be challenged with factors that may impede economic growth.

“When you’ve been called the ‘flavor of the year’ that is the time that you will have to be more careful and vigilant. We have identified four factors that may keep us from achieving the 7.3 percent average GDP (gross domestic product) growth starting 2015.”

Ebb and flow of foreign capital that will lead to volatility in financial markets, slow  global growth, infrastructure gaps and the financial inclusion challenge.

Amador said while flow of foreign capital into the country has certain benefits, it too poses some risks including lending and balance sheet mismatches and asset price misalignments.

Amador, however, said that the Philippines, through sound fiscal policies, is well-positioned to ride out the volatility.

The slow   global growth is also expected to affect global markets despite the Asia region now being seen as the bright spot in world economy; thus, could affect the country’s economic performance if not managed well.

“Infrastructure gap is also one critical area but the government is already doing something to fill these gaps and stimulate economic activities around the country,” she said.

The financial inclusion is another factor that BSP is looking to address.

“Based on our figures, only two in ten households have bank accounts now which we hope will increase eventually. The main reason is that they don’t have enough money for bank deposits and others said that minimum balance to open and maintain an account is too high or simply they don’t like to deal with banks,” she said.

“These disallow the development of a ‘saving culture’ which should favor economic development for a country with majority of its population becoming financially educated,” she said.

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