HSBC economist says PHL has potential to grow double-digit

MANILA, March 12 (PNA) — An economist of the Hong Kong and Shanghai Banking Corp. (HSBC) said the Philippine economy has the potential to post a double-digit growth.

However, HSBC Managing Director and co-head of Asian Economic Research Frederic Neumann said more focus is needed on the country’s infrastructure investments and manufacturing.

“There is no reason for the Philippines why we couldn’t have double digit growth but the missing link, I don’t say it’s the only thing but they drag on it, is the infrastructure,” he said in a briefing Wednesday.

The government targets infrastructure spending to be about five percent of the domestic economy’s output by 2016.

As of end-December 2013, share of infrastructure spending on the country’s gross domestic product (GDP) is about 2.8 percent.

Neumann admits that achieving gains from higher spending on necessary infrastructure takes a long time but said that its benefits lasts longer.

He explained that investors he has talked to often cite lack of infrastructure in the Philippines as among the major hindrance why investments to the Philippines remain low compared to neighboring countries.

He said the public-private partnership (PPP) initiative “has made reassuring nose about raising infrastructure” but noted that “the task is daunting and urgent.”

He said the present time is a “historic opportunity” for the country in terms of funding cost for infrastructure projects because of low interest rate environment and because China is losing competitiveness, which in turn can be taken advantage of by the Philippines if it has the necessary infrastructure.

Once necessary infrastructure are in place, the Philippines can, in turn, support its manufacturing sector and regain where it was some 40 years ago, he said.

“FDI (foreign direct investment) could be triple the level if the Philippines places itself as a competitive manufacturing country,” he said.

Relatively, Neumann expects a below seven percent growth for the Philippines this year.

The HSCB earlier projected a 5.9 percent growth for the country this year, lower than the 7.2 percent it posted in 2013, and 6.1 percent growth for 2015.

For 2015, Neumann projects output to be about 5.8 percent to six percent while 2016 growth is eyed at 5.8 percent.

The HSCB economist said growth is expected to remain robust but long-term growth is seen to go down to the five to six percent level from the current six to seven percent if the needed boost in infrastructure spending and manufacturing is not put in place.

“I am worried that unless we get a sharp improvement in the investment climate, the long-term growth rate of the Philippines will sort of be around five to six percent rather than seven to eight percent or nine percent that the Philippines could really achieve if it were to raise its game on investment,” he added. (PNA)