PHILIPPI NE INSTITUTE FOR DEVELOPMENT STUDIES Surian sa mga Pag-aaral Pangkaunlaran ng Pilipinas
Vol. XXVI No.1
Editor's Notes 2007 is indeed a notable year for the Philippines in terms of economic growth. In fact, the GDP growth surpassed the 6.1–6.7 percent government economic growth target (DRN January-February 2007). But the question that remains to be answered is whether this performance can be sustained in 2008. PIDS President Dr. Josef T. Yap provides another forecast in this issue where his discussion on what’s in store for the Philippine economy in 2008, however, focuses more on key economic issues instead of the usual detailed discussion of performance and prospects. One such issue is the appreciation of the peso vis-à-vis the US dollar and its impact on remittances from overseas Filipino workers. Another is the phenomenon of rising profit shares and falling wage shares—despite increases in profits, more Filipinos are still unable to find work. This also relates to the poor record of investments which, as reported by the Asian Development Bank, is affected by governance issues, corruption, and crime and security concerns. Also in this issue, we feature a study conducted by the Asia Pacific Policy Center as part of the preparatory activities for the 6th Philippine Human Development Report. It stresses the need to further disaggregate the provincial-level data with respect to the promotion of human development (HD). The paper argues that since HD-related programs are being formulated and implemented at the municipality/city level, this is the level where it should be monitored. DRN
What's Inside 9
Achieving human development by mobilizing partners in the countryside: lessons learned
15 8th PIDS Corner opens in Cavite
DEVELOPMENT RESEARCH NEWS January - February 2008
ISSN 0115-9097
What's in store for the Philippine economy in 2008? Josef T. Yap*
P
hilippine GDP growth surged to its highest level in 31 years, recording 7.3 percent in 2007 (Table 1). The much anticipated breakthrough was achieved as economic growth crossed the 7 percent threshold. Election spending, government infrastructure projects, and personal consumption expenditure—underpinned by remittances from overseas Filipinos— were the primary sources of economic activity. However, it remains to be seen whether this performance can be sustained in 2008, not to mention the medium term. Several factors will lead to a likely economic downturn in 2008. One, the global economy will be buffeted by a drop in output growth of industrialized countries, the highlight of which is the pending US recession. Persistent high fuel prices, the fallout from the US subprime crisis, and jittery financial markets are the major contributors to the current global economic slowdown. Two, the stimulus from the 2007 elections and government infrastructure program will decline. And three, the low investment rate during the past decade will take its toll on production capacity. The format of this year’s Outlook will be slightly different. Instead of discussing economic performance and prospects in detail, some key economic issues will be highlighted. The potential impact of these issues on the 2008 forecast will be referred to when relevant. * President, Philippine Institute for Development Studies (PIDS). Mr. Michael R. Cabalfin contributed to the section on the global economy while Ms. Fatima Lourdes E. del Prado contributed to the section on trickling down of economic growth. The usual disclaimer applies.