PHILIPPI NE INSTITUTE FOR DEVELOPMENT STUDIES Surian sa mga Pag-aaral Pangkaunlaran ng Pilipinas
Vol. XXIX No.1
Editor's Notes With a new government in place and amid all the developments that have taken place in the past two years and that are happening at the moment, what prospects are in store for the Philippine economy in 2011? Dr. Josef T. Yap, PIDS president, in his usual review of the Philippine economy in the previous year and outlook for the year ahead, provides an analysis of what to anticipate based on outcomes and developments in the various economic sectors in 2010. Stressing the point about the sharp rebound in the Philippine economy in 2010, something that all initial and even revised forecasts for 2010 missed, Yap expressed the hope that the positive impact of factors that contributed to such rebound can and will continue in 2011 and the coming years. This, however, will depend on how the new administration will address the risks that will come its way from the potential higher inflation due to the expected higher food and fuel prices; the volatile capital inflows; and the continuing fiscal deficit. With rising poverty also remaining to be a major challenge, macroeconomic policies and programs, according to the analysis, should center not only in trying to achieve high (and sustained) economic growth but also in putting into effect redistributive efforts to contain poverty. The bottomline is that all these require a great deal of institutional strengthening and political will. This, in itself, is perhaps the biggest challenge. DRN
What's Inside 15
Financing development in a postcrisis world
DEVELOPMENT RESEARCH NEWS January - February 2011
ISSN 0115-9097
The Philippine Economy in 2010 and Prospects for 2011 Josef T. Yap*
A
fter slowing down in 2008 and 2009—owing primarily to the repercussions of the 2008 Global Financial and Economic Crisis—the Philippine economy grew rapidly in 2010. Gross domestic product (GDP) posted a growth of 7.3 percent in 2010 compared to only 1.1 percent in the previous year (Table 1). Economic growth is comparable to the 2007 figure, which is not surprising since election spending provided a boost to economic activity in both years. All initial forecasts missed the sharp economic rebound (Table 2). Even revised forecasts were lower than the actual outcome. This implies that analysts have overlooked factors that contributed to economic growth. Hopefully, the positive impact of these factors will continue in the near future. Policy issues in the medium term relate mainly to diversifying sources of economic growth. On the expenditure side, there must be more balance in favor of investment and away from consumption. On the production side, exports have to be more diversified and backward linkages to the domestic manufacturing sector have to be strengthened. This will allow greater employment in the more productive sectors of the economy. * President, Philippine Institute for Development Studies. The sections on economic performance in 2010 were largely lifted from Chapter 1 of the PIDS 2010 Economic Policy Monitor, which was coauthored by Ruperto M. Majuca, a Senior Research Fellow at PIDS. The excellent research assistance of Ms. Kris A. Francisco, Research Analyst II at PIDS, is gratefully acknowledged. Likewise, the author would like to acknowledge the excellent contribution of Aubrey D. Tabuga and Celia M. Reyes who wrote the Box on Poverty and Economic Growth. The usual disclaimer applies.