Reg’l growth diversification to boost PHL economy’s output

MANILA, Feb 20 (PNA) — Share of some regions to the Philippines’ growth has been noted and Standard Chartered Bank said regional diversification continue to present great potential to boost the economy’s output.

In a research note, the bank said contribution of Mindanao in the country’s output remains to have the lowest share among the three island groups but it has been rising.

It noted that the country “has made some progress in diversifying regional growth.”

It said Metro Manila remains to have the biggest share in the growth at about 36.3 percent of total output, as measured by gross domestic product (GPD), in 2012.

However, domestic expansion is now “more evenly distributed than in previous decades” since share of Mindanao in the economy’s output has been rising since the 2000s.

The research note, on the other hand, said further progress on this area will largely depend on decisions of the Philippine Economic Zone Authority (PEZA) in opening of new economic zones.

Citing PEZA data, information technology (IT) parks has the biggest share of economic zones at 64.5 percent followed by the manufacturing economic zones, 23.4 percent; tourism, 6.5 percent; and agro-industrial, 5.6 percent.

The report said the Central Visayas and Central Mindanao has been growing faster compared to other regions, spearheaded by Cebu as the rising business process outsourcing (BPO) hub.

Cebu is attracting more BPO investors because of lower cost for offices and strong infrastructure, it said.

The report said that although regional growth has diversified “income equality remains an issue.”

“As the Philippines develops, we see increased pressure to achieve more evenly distributed growth,” it said.

“Overall, the Philippine government has done a commendable job in improving growth prospects. The challenge now is to quicken the pace of development, by creating the necessary hard and soft infrastructure environment to make this happen,” it pointed out.

The bank expects the domestic economy to post above-trend growth after exceeding the government’s six to seven percent target for 2013 when it expanded by 7.2 percent.

It explained that combining the bank’s growth forecast with recent output levels average annual growth of the country between 2011-15 is about 6.3 percent , higher by more than one percentage point that the previous average growth of five percent.

Meanwhile, the bank’s clients consider inflation as the major risk to domestic growth in 2014.

Most or 59 percent of the respondents to the bank’s survey expects rate of price increases to rise to four to five percent this year, higher than the bank’s 3.9 percent forecast for the year.

“We expect inflation to remain well behaved, barring any event risks from food and energy inflation,” it said.

Also, the bank said most of their clients expect the Bangko Sentral ng Pilipinas (BSP) to hike its policy rates by 25-50 basis points this year, same as Standard Chartered Bank’s forecast.

To date, the central bank’s overnight borrowing rate is at record-low of 3.5 percent and the overnight lending rate is at 5.5 percent.

These were maintained since the last 25 basis point cut in October 2012. The BSP’s policy rates were slashed by a total of 100 basis points in 2012 to help boost domestic growth. (PNA)