The FINANCIAL — Investments in infrastructure and education, skills, and health, are not only key to sustaining high growth but will also ensure that poor and vulnerable families have access to better job opportunities. Delivering inclusive economic growth through good jobs remains the country’s most pressing challenge, according to the World Bank.
The World Bank’s Philippines Economic Update (PEU) released on April 16 said that in 2017 the Philippines was among the top three growth performers in the region. Monetary and fiscal policy supported this growth performance.
The Philippine economy will remain strong, projected to grow at an annual rate of 6.7 percent in both 2018 and 2019. The economy is currently growing at its potential, making productive investment in physical and human capital essential so that the economy can continue to grow along its current trajectory.
Released twice a year, the PEU also flags potential risks that could affect the growth prospects of the economy.
“There are several domestic risks facing the Philippines, including increasing inflation and an overheating of the economy as well as high fiscal deficits,” said Birgit Hansl, World Bank Lead Economist and Program Leader for Equitable Growth, Finance and Institutions for Brunei, Malaysia, Philippines and Thailand. “External risks consist of greater policy uncertainty related to growing trade protectionism and increasingly inward-looking sentiments in several advanced and emerging economies, and potential market volatility from faster-than-expected U.S. Federal Reserve rate normalization.”
Finally, slow progress in the medium term to implement structural policy reforms that would increase investment and create quality employment could prevent the Philippines from achieving more inclusive growth.
In particular, higher real wages are essential to achieve shared prosperity and inclusive growth. In recent years, the Philippine economy has made great strides in delivering inclusive growth, evidenced by the declining poverty rates and a falling inequality. Unemployment has reached historic low rates. However, underemployment remains high, near its 18-20 percent decade-long average. At the same time, mean wages remained largely stagnant.
“The main challenge facing the Philippines today is not unemployment, but rather the poor quality of jobs in the labor market,” said Mara K. Warwick, World Bank Country Director for Brunei, Malaysia, Philippines and Thailand. “High-quality jobs and faster growth of real wages are the missing links to higher shared prosperity in the Philippines.”
More can be done to create high-quality jobs in the Philippines. The government needs to affirm its commitment to the promotion of competition, secure property rights, less regulatory complexities, and an improved investment climate.
Investing in the future means prioritizing investment in both physical infrastructure and human capital, such as in education, skills, and health, as this will create better employment opportunities, especially among the poor.