Economic Review of the First Six Months of 2014 in the Philippines

July 25, 2014 | SERVCORP

According to the International Monetary Fund, the Philippine economy is strong enough to ride out current issues regarding its financial conditions, especially in light with the controversies surrounding the government's PDAF (Priority Development Assistance Fund) issues. However, public investment must increase in order to serve as supporting pillars for this growth and improvement. The IMF Resident Representative of the Philippines, Shanaka Jayanath Peiris, said that while the Philippines is expected to fare positively as monetary authorities go to a more "normalized" policy stance towards an expansionary fiscal policy that was instated to deal with past and present typhoon reconstruction expenditures and infrastructure upgrades, the government has to play its part in continuing the expansion of the country.

Growth Is at 7Percent This Year 

Philippine grow is expected to ease up and go at a rate of below 7 percent for 2014 in accordance with the initial figures released in regards to the country's economic performance for the first quarter or the first six months of 2014. With that said, there's still some good news ahead for the Philippine archipelago. Loads of reforms are being pushed forward by the government to support the lower-than-expected but still viable economic growth of the nation. What's more, even though growth is slower than in previous years or in recent quarters, it should still remain target when everything is said and done.

The slowdown could very well be because of political upheaval, which even includes an impeachment case for President Benigno Aquino III. During the first quarter, economic growth eased to below the 6.5 percent to 7.5 percent target, at around 5.7 percent. Public spending has also slowed down because everyone's purse strings have tightened due to rising consumer goods prices. The bottom line here moving forward, according to the IMF, is that there should be more public investment in order to curtail the slowdown and ensure that the 7 percent stalled growth would not worsen or plummet. Public spending and investment must be encouraged to stabilize or speed up this slowdown.

What's in Store for the Philippines in the Future?

Typhoons like Yolanda and Glenda will naturally have an impact, as well as electricity generation constraints, weak agricultural production, and a slowdown on residential projects. However, the Philippines isn't in dire straits despite all these issues coming in all corners, which means that investor support and domestic demand remains strong and steady. The IMF official particularly praised the government's efforts in significantly improving its fiscal program in recent years, because the raising of allocations to certain economic sectors (which is in line with the administration's inclusive growth agenda) is what the economy needs to weather any storm, both literal and figurative.

Back in April, expenditures decreased by 6 percent, while in May, disbursements fell by 4 percent. Therefore, there's a budget tilt to an 8.5 billion Philippine peso surplus during the first six months or the first quarter of 2014. Peiris says that May 2014's fiscal surplus is a reflection of lower than programmed spending and higher revenues, so it's indeed impressive how the Philippines has concentrated on allocating that money to social sectors. Improving spending efficiency not only on the amount of disbursements in the last few months but also in general showcases that the government has the right idea when it comes to supporting Philippine economic growth.

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