(First of four parts)
The latest economic briefing of the university of Asia and the Pacific (UA and P) strikes many encouraging notes among businessmen and economists, as it asserts that an 8-10% Gross Domestic Product Growth (GDP) is “doable, “ says the UA and P economists in its annual economic briefing, as reported in the Nov. 23 edition of Business World.
In the same annual economic briefing the university’s Dr. Vic Abola and Dr. Bernardo Villegas said that the Philippines is poised for 8-10% GDP growth on the heels of the Duterte economic teams 10 point socioeconomic agenda. The UA and P also believes that Foreign Direct investments (FDI), in which we have lagged behind neighboring Indonesia, may hit 7 Billion dollars in 2017.
As with the 7.1% GDP already achieved in the last quarter, the economy is predicted to hit 6.9% GDP this year, it is not far from the 7 percent prediction of the UA and P made in late June this year. (news.uap.asia/index.php/2016/06/27/uap-economists-gdp-grow-7-percent-2016/)
10% GDP achievable?
All these are good signs from esteemed economists that echo the sentiments of many others, but is 10% really achievable?
To help answer the question it is helpful to understand the role of government in a market economy. Of particular interest is the impact of increased public spending on infrastructure. We all know that government is the one institution in a country with perhaps the most locally available money. Sovereigns never go under, as they command almost exclusive use of a country’s natural resources if and when necessary to keep its economy afloat. No other economic player can do that.
This is why the decision of government to spend has its effects on the volume of business taking place within a certain economy, especially when other drivers like foreign direct investment, agriculture and manufacturing are rather weak or fledgling.
Spending on roads, bridges and ports not only spurs local employment and manufacturing (cement and rebar, for example), but also spurs further economic activity after said structures are built, since investors will be better to able to locate important business like manufacturing when such infrastructure is available.
The Philippines is notorious for poor infrastructure, and as the previous administration underspent in this vital sector, the Duterte administrations plans to spend more will definitely give the economy the boost it needs.
Almost by itself, but add this to FDI and increased interregional trade, and you have a good mix that makes that 10% GDP “doable.”
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