STATEMENT OF SECRETARY ARSENIO M. BALISACAN NEDA Year-End Media Briefing 18 December 2012, 11:00 am NEDA Board Room

Good morning!

I am very pleased to welcome you to this year-end media briefing. It’s worthwhile to look back on how our economy has performed so far this year, as well as our prospects for 2013 and the challenges that we, as a country, have to address to ensure that our path towards inclusive growth and development will not be derailed.

Despite the risks and uncertainties in the global economy, we carried with us an unyielding trust in our leaders to implement necessary policies and programs, and high hopes of a better economy. And we were not disappointed, as our country posted a remarkable 6.5-percent growth in the first three quarters of 2012. This means that we will most likely surpass the full-year growth assumption of 5.0 to 6.0 percent set by the Development Budget Coordination Committee, or DBCC, for 2012. In fact, this is much closer to our aspirational target of 7.0 to 8.0-percent annual real GDP growth that we have set out in the Philippine Development Plan for 2011-2016.

Our recent economic growth is especially remarkable because it is higher than any other ASEAN country. Moreover, this was achieved without sacrificing stability, as inflation has been kept low and fiscal deficit-to-GDP ratio is only at 1.4 percent. Our good performance has been recognized by credit rating agencies as well as by foreign businesses and the country’s development partners. Our credit rating has been upgraded to just below investment grade and we have moved up several notches in various competitiveness ratings.

Impact on Employment

Achieving rapid economic growth is one thing, and inclusive growth is clearly another. Given the latest labor and employment figures, generating employment and ensuring that these are of good quality remain our greatest challenge. Despite the remarkable economic growth, unemployment rate has remained at around 7.0 percent and underemployment rate at 20.0 percent in 2012.

We will continue our efforts to improve our country’s competitiveness as this will lead to more investments that will create the needed employment in the medium to long term. In addition, we, at NEDA, have been collaborating with other agencies, including the Department of Labor and Employment, or DOLE, to identify strategies to boost employment in the short term.

Economic Outlook for 2013

Taking into consideration the latest DBCC-approved monetary and external assumptions and fiscal program, we are retaining the 5.0 to 6.0-percent growth assumption for 2012, although we are confident that we will breach the high end of this assumption. We forecast growth in 2013 to be between 6.0 to 7.0 percent and in 2014, between 6.5 to 7.5 percent. 

We hope to see a more vibrant industry sector. We see an improved manufacturing sector buoyed by the semiconductor and electronics industry, as the world economy is expected to recover between 2013 and 2014.  Construction is also expected to grow robustly in 2013 due to the onset of major public infrstructure projects and additional boost coming from private construction, while utilities will be driven by the growing demand for power, water and gas.

For the services sector, the continuous expansion in the IT-BPO industry, tourism, financial intermediation, and trade are seen to fuel growth.

On the demand-side, household consumption will remain robust, and the expected expansion of exports and construction will further boost growth. Capital formation, especially in the private sector, is expected to contribute a greater share of overall growth.

Notwithstanding the positive economic outlook in the near-term, we remain vigilant of the global and domestic risks to growth. Problems in the Euro area remain unresolved. There is also the looming fiscal cliff in the US. The slow recovery in the US economy continues to affect us negatively, as their monetary authorities try to prop up their economy through quantitative easing. This, combined with our strong macroeconomic fundamentals and good economic prospects, has resulted in the appreciation of our currency that is threatening to erode our competitiveness.

While the global economy is hoped to recover beginning 2013, there is, however, the possibility of oil price increases due to higher global demand for petroleum products, especially in the advanced economies.

Policy Directions

We will continue our efforts to improve the investment climate in the country and reduce the cost of doing business. The institutional reforms that we have started are undeniably pushing the frontiers of our economy and accelerating the confidence in the market. We hope to institute more reforms, and it is our earnest desire that these reforms in the bureaucracy should fully cascade in all the departments and local government units.

We will continue to leverage monetary and fiscal policy to achieve inclusive economic growth. Fiscal prudence will be maintained and inflation expectations will be well managed. We will continue social investments on the poor through the Conditional Cash Transfer program, or CCT, PhilHealth, socialized housing, and even the Community Based Employment Program, or CBEP. Through these and other programs, we hope to stimulate the economy in the countryside.

Our key priority sectors, namely tourism, business process outsourcing or BPO, electronics, housing and real estate, agribusiness and forest-based products, logistics, and shipbuilding, will be given more focus. We need also to consolidate the various industry roadmaps to further fuel the industry sector, especially manufacturing.

We could also take advantage of bilateral partnerships to further diversify external trade and undertake measures to improve our trade relations. Given the strong growth of our Asian neighbors, the government will actively adopt policies to fully utilize the institutional setup provided by the ASEAN and our existing free trade agreements with Japan, China, and India to increase the Philippines’ role in the regional production chain.

Overall, these policy directions are aligned with the PDP for 2011-2016. Before the year ends, the Socioeconomic Report (SER) will be made available to the public. By January 2013, we will start updating the PDP and its accompanying documents, such as the Public Investment Program or PIP, and the Results Matrix or RM. We will be reviewing our targets and strategies in consonance with the ever-changing environment to achieve our goal of inclusive growth. We look forward to addressing the challenges awaiting us.

Thank you for coming today and we wish our country a Merry Christmas and a prosperous 2013! 

M.R. No. 2012-087

18 December 2012