The government should work on increasing job opportunities in the country to take advantage of the growing labor force and pull down poverty incidence, the International Monetary Fund said.
“Favorable demographics are a missed opportunity if the economy cannot effectively absorb the growing working-age population,” the IMF said in a statement.
“Better domestic job opportunities would reduce poverty, thereby curtailing outward migration and the accompanying social hardships and sustained remittance inflows that can complicate macroeconomic management in the absence of compensating productivity gains,” the Fund said.
Government officials have been trumpeting the country’s entry into a “demographic sweet spot” by 2015, which is seen driving economic growth to new highs as domestic consumption further climbs and more investments flow in.
Latest data showed that the unemployment rate improved to seven percent in April this year, from 7.6 percent in the same period last year. This reflects 1.7 million additional employed persons in April.
Latest available data also showed the poverty incidence in the country fell to 24.9 percent in the first half of 2013 from 27.9 percent in the same period in 2012.
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The economy grew by 7.2 percent last year, sustaining the 6.8-percent growth posted in 2012. The IMF said that the domestic economy remains strong and even equipped with financial sector and external buffers to shield it from shocks.
“The challenge is to deliver high-quality growth. Better realizing the Philippines’ potential for rapid, sustained and more inclusive growth calls for further reducing bottlenecks to investment and formal sector employment that may be discouraging broad-based business activities,” the IMF said.
“A more diversified production structure would strengthen resilience to economic shocks, which unduly impact the poor,” it added.
The economy grew by a lower-than-expected 5.7 percent in the first quarter but the government kept its 6.5-to 7.5-percent growth target for the full year.
But risks to the rosy prospects of the Philippine economy remain, the IMF cautioned.
“Abrupt exit from exceptionally loose monetary policies abroad, a sharp slowdown in China or other emerging markets, or a major geopolitical incident could impact global or regional trade and capital flows and adversely affect the Philippine economy,” the IMF said.
“On the domestic front, rapid credit growth or a disproportionate flow of resources to the property sector could boost short-term growth but heighten volatility thereafter, impacting over leveraged households and corporates,” it added.
Written by: Kathleen A. Martin