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Chapter 1. in Pursuit of Inclusive Growth

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Chapter 1. in Pursuit of Inclusive Growth Chapter 1. In Pursuit of Inclusive Growth Faced with a mediocre growth performance, a by strong domestic demand, sustained growth in population growth rate of more than two percent overseas Filipino remittances, and low inflation. a year, and with its resiliency challenged by the External events weakened the economy in 2011, double-dip global financial crisis, the Philippines affecting trade, foreign direct investments, and through its new administration in June 2010 other financial channels. Disruptions in the committed itself to achieving inclusive growth global supply chain due to the disaster in Japan through transparent and responsive governance, in the first quarter and the flooding in Thailand massive infrastructure investment, increased in the third quarter had a negative impact on the competitiveness, improved access to financing, industry and manufacturing sectors. Moreover, improved social services, a stable macroeconomic the social unrest in the Middle East and the environment, ecological integrity, quality African regions, due to its influence on the supply education, appropriate science and technology and price of oil in the international market, partly applications, and advanced peace process contributed to the economic slowdown. These alongside improved national security. From events, alongside the Euro debt crisis and the the second half of 2010 to the end of 2011, the sluggish recovery of the US economy from the Philippines sought to meet these targets despite financial crisis, resulted in a noticeable decline unexpected external shocks that threatened its in investments. The delay in spending for public economic growth. However, by the first semester construction in 2011 further dampened growth. of 2012, indicators significantly improved, thus The first half of 2012 showed a more aggressive bringing the country’s development path closer stance for the Philippine economy as real GDP to the targets set by the Philippine Development expanded by 6.2 percent, driven by services and Plan (PDP) 2011-2016. industry on the supply side and by household consumption, government consumption, and net Assesment exports on the demand side. Macroeconomic performance is Headline inflation remained well within the on-track government’s target range of 3.0 to 5.0 percent for 2010 until the first half of 2012. With a The Philippine economy recorded a growth of 6.7 benign inflation outlook, the Bangko Sentral ng percent in the second half of 2010, which slightly Pilipinas (BSP) reduced its policy rates to support dampened full year growth to 7.6 percent. At the domestic economic activity and reinforce investor beginning of 2011, growth fell short of the target confidence. The lower domestic interest rates due to a series of external shocks and finally closed supported the upbeat lending activities of banks the year with at 3.9 percent. Recovery, however, during the period under review. The sustained was well on its way in the first half of 2012, with inflow of remittances from migrant Filipino gross domestic product (GDP) expanding by 6.2 workers, net portfolio investments, and foreign percent. direct investments (FDI) contributed to further strengthen the peso. To some extent however, the Growth in 2010 was fuelled primarily by peso lost external price competitiveness against the Economic Resiliency Plan (ERP), which competitor currencies and major trade partners pumpprimed the economy through upgrades in (MTPs) due to its real appreciation against the infrastructure and capital stock and expanding US Dollar in recent periods. social safety nets. This was further complemented In Pursuit of Inclusive Growth 1 Fiscal performance is generally commendable but These developments translate to an average still has ample room for improvement given the employment generation for the first two years of path of revenues and spending. Revenue collection the current administration at 997,000 per year performance was still below programmed targets which is close to the PDP target of 1 million for 2011, as well as for the first half of 2012. annually. All three broad sectors recorded gains, The underperformance comes mainly from tax with services posting the strongest average collection shortfalls particularly for BIR and growth, followed by industry and agriculture, BOC. To be able to catch up with planned levels fishery and forestry. However, key weaknesses of revenues, the usual resolve of accelerating remain in terms of high underemployment rate non-tax revenue collections still appeared to be and the rise in part-time employment. the solution to reach targets. Actual primary Infrastructure needs further expenditure or spending net of interest payments, bolstering to facilitate mainly used for spending on different sectors of inclusiveness the economy had been on a gradual decline with respect to the size of the economy. As of 2011, primary spending as a share of GDP stood at Infrastructure contributed to the achievement 13.1, down from 13.6 percent in 2010. The ratio of the following higher-level objectives toward for the first half of 2012 is about 12.8 percent. inclusive growth due to the following: (a) While this may imply that the government is improved tourism, agriculture and industry slowly closing the fiscal gap, the public spending performance; (b) improved access to social goods figures are still far from the 16.2 ratio that the and services; (c) improved environmental quality; Plan wishes to achieve for 2016. and (d) increased resilience to climate change and Rising competitiveness spurs natural disasters. Particularly, the development more employment program of the transport subsector provided and enhanced access to major airports, seaports/roll- on roll-off (RORO) ports, markets, production Improvements in the ranking of the Philippines in areas, strategic tourist destinations, and economic global competitiveness reports were noted, however centers throughout the country. still falling short of the end-of-plan targets. The Philippines ranked 65th out of 144 countries, In particular, the government responded to advancing 22 places from its lowest rank in 2009, the need for adequate, accessible, and quality according to the WEF Global Competitiveness infrastructure and services, as evidenced by Report 2012-2013. The country also performed the following accomplishments: (a) additional better in the 2011-2012 IFC/WB Doing Business 428,445 and 211,908 households (HHs) Report, ranking 136th out of 183 countries and electrified by Electric Cooperatives (ECs) and moving 12 notches higher from 148th place in Private Investor-Owned Utilities (PIOUs), 2010. By the end of the Plan period, the country respectively, from 2010 to 2011; (b) increased in hopes to land at the top 30 percent or at least rank families with access to safe drinking water from 61 globally in the IFC/WB rating. 84.8 percent in 2010 to 85.5 percent in 2011 (c) increased cellular mobile telephone services Competitiveness has cascaded to the local (CMTS) and broadband coverage in cities/ government units (LGUs). The LGUs have municipalities from 94.7 percent in 2010 to reduced the number of procedures to process 99.2 percent in 2011 and from 46.6 percent in business permits and licenses to five steps or less. It 2010 to 54.53 percent in 2011, respectively; (d) now only takes five days for business renewals and increased number of public health facilities from not more than 10 days for new business permits 267 Barangay Health Stations (BHS), 106 Rural to be processed under the streamlined Business Health Units (RHU), and 149 Government Permits and Licensing System (BPLS). As of Hospitals (GH) in 2010 to 546 BHS, 973 RHU, June 30, 2012, 421 or 87 percent of the 480 target and 301 GH in 2011; and (e) increased number LGUs have implemented the streamlined process of classrooms by 14,149 from 2010 to May 2012, and by 2016, it is expected that 100 percent of the which contributed to the improvement of the identified LGUs would have already streamlined classroom to student ratio in the secondary level. their permits and licensing procedures. 2 Socioeconomic Report 2010-2012 Great strides have been achieved Good governance and rule of in increasing access to financing law are drastically reshaping the landscape of public institutions The MSME Development Plan 2011-2016 launched on July 7, 2011, identifies the cluster- As the overarching strategy of the PDP, good based approach as the mechanism for delivering governance deserves a special highlight. For the SME interventions such as shared service past two years, the Aquino Administration put in facilities, product development and market place critical reforms to operationalize the Plan’s promotion, equity financing/credit assistance, strategies and lay the foundation for effective and micro enterprise development. and honest governance. The government’s firm commitment to transformational leadership To bring the services of the government and the has gained support from different sectors of the private sector to the regions, the SME Caravan society and effectively harnessed this to deepen and the Rural Micro Enterprise Program was citizen participation in governance. This has established. In 2011, 2,034 overseas Filipino enabled the Aquino Administration to attain workers (OFWs) were also provided training by initial gains in improving the government’s the Overseas Workers Welfare Administration responsiveness to public needs, strengthening (OWWA) and the Philippine Trade Training democratic institutions, rebuilding people’s
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