2015年-世界发展银行全球_Philippine_Economic_Update_January_2015___Making_Growth_Work_for_the_Poor_78页_2mb

Philippine Economic Update Summary

Core Content

The Philippine Economic Update (PEU) for Q3 2014 provides an overview of recent economic developments and policy changes in the Philippines, emphasizing the need for structural reforms to ensure inclusive growth and poverty reduction.

Key Economic Developments

Growth Performance

• The Philippine economy grew by 5.3% in Q3 2014, the slowest growth in 11 quarters.
• Growth was about average compared to major East Asian economies in Q3 and for the first 3 quarters of 2014.
• The services sector, the main growth engine, slowed to its lowest level in 12 quarters.
• Industry grew the fastest, contributing 2.4 percentage points to GDP growth, while agriculture contracted by 2.7%, with rice and corn production falling by 10% and 5.8%, respectively.

Demand-Side Factors

• GDP growth was driven by private consumption, private investment, and net exports.
• Private consumption grew by 5.2%, indicating recovery from Typhoon Yolanda's impact.
• Net exports turned positive in Q3, contributing 2.1 percentage points to growth due to stronger export performance and lower import growth caused by port congestion.
• Government consumption contracted by 2.6% in Q3, and infrastructure spending fell by 6.2%, due to court rulings, budget bottlenecks, and slow disbursement of reconstruction funds.

Supply-Side Factors

• Inflation started to moderate in September, with the CPI dropping from 4.9% in August to 2.7% in December, resulting in a full-year inflation rate of 4.1%.
• Core inflation also decelerated, reaching 2.3% in December from 3.4% in September, with a full-year core inflation of 3%.
• Food inflation slowed to 5.8%, supported by stable rice supply (imported 1.8 million metric tons in 2014) and falling oil prices (down by 40% between January and December 2014).

Policy Developments

Fiscal Policy

• The government faced a full-year balance of payments deficit of USD 3.4 billion, the first in a decade.
• Remittances remained strong, contributing to a current account surplus.
• International reserves were at comfortable levels, exceeding 10 months of imports.
• The revised 2014 growth projection was 6%, while 2015 growth could reach 6.5% if the government fully executes the 2015 budget and implements the Yolanda master plan.

Tax and Revenue Policy

• The country has an investment gap of 6.8% of GDP, which can be partially addressed through tax administration reforms.
• Improving tax collection could generate 3.8% of GDP in fiscal space over the medium-term.
• Tax policy reforms are needed to raise revenue and improve equity, including:
  • Rationalizing tax incentives to be more targeted, transparent, and performance-based.
  • Adjusting tax rates and valuations to reflect inflation, especially for petroleum excise taxes and property valuations.
  • Lowering the top marginal income tax rate to 25% and simplifying the tax regime for micro and small enterprises.

Poverty and Employment

• Net job creation reached over 1 million in October 2014, with the unemployment rate dropping to 6%, the lowest in 10 years.
• Underemployment increased from 18.0% to 18.7%, indicating a challenge in employment quality.
• Poverty reduction has been more inclusive, with the bottom 20% experiencing faster income growth (9.9%) compared to the upper 80% (2.4%).
• Conditional cash transfer (CCT) programs are well-targeted, with domestic cash transfers to the bottom 20% growing by 29%.
• However, agricultural underemployment and value-added contraction pose risks to poverty reduction, as agriculture is a key livelihood source for the poor.

Key Policy Recommendations

• Accelerate reforms to translate higher growth into more inclusive growth, focusing on:
  • Infrastructure investment.
  • Enhancing competition in key sectors.
  • Simplifying regulations to promote job creation.
  • Protecting property rights to attract more investment.
• The PEU elaborates on the first two recommendations: infrastructure investment and enhancing competition.
• Special focus areas include:
  • Congestion in Metro Manila: Costs the economy ~8% of GDP annually; solutions involve better road networks and mass transit systems.
  • Power shortages in Luzon: Risk of crisis in April-May 2015 due to aging generation plants and low reserve capacity; need for diverse energy sources and competition in the retail sector.
  • Reviving electronics exports: Requires improved power reliability, infrastructure and human capital investment, and reduction of non-tariff barriers.
  • Liberalizing rice policy: Current quantitative import restrictions should be replaced with tariffs to reduce rent-seeking and support agricultural diversification.
  • Enhancing competition in domestic shipping: Need to liberalize cabotage, improve port efficiency, and open the market to foreign competition.

Risks and Challenges

• Delays in PPP projects and a tepid global economy could limit 2015 growth.
• High underemployment and agricultural sector challenges may undermine poverty reduction efforts.
• Asset bubbles are a concern, with stock prices rising disproportionately compared to earnings and property prices outpacing rents.
• Financial volatility led to capital outflows, resulting in a balance of payments deficit.

Conclusion

To achieve inclusive growth and poverty reduction, the Philippines must implement structural reforms in infrastructure, competition, and taxation. The government should improve budget execution, tax administration, and regulatory capacity to support these reforms. A more transparent and efficient tax system, along with open data initiatives, will help build public trust and support long-term growth. The PEU highlights the importance of private sector participation and foreign investment in driving economic performance and reducing inequality.