The government’s bid to increase investments as another growth driver of the domestic economy was cited by Citigroup as a sure way to ensure continued growth path of the Philippines.
Philippines registered a 7.9 percent growth in the second quarter this year, slightly higher than the revised 7.8 percent in the previous quarter and far higher than the 1.2 percent year-ago bringing the first half output at 7.9 percent.
“Shift from consumer-led growth to investment-driven growth over the medium-term is essential for higher potential output growth that would ease demand-based inflation risk,” Citi said in its report dated Aug. 4, 2010.
The report noted earlier statement of a monetary official that the current level of growth would not result to a spike in inflation.
Rate of price increases in the country has been declining with the July 2010 figure at 3.9 percent, same as the previous month’s level, while the year-to-date figure is 4.2 percent.
Monetary officials are confident that inflation this and next year would averaged below the mid-point of the 3.5-5.5 percent and three to five percent targets for the two-year period.
Earlier, Bangko Sentral ng Pilipinas Deputy Governor Diwa Guinigundo said the domestic economy can accommodate a seven percent output level without causing any jump in the inflation rate because it still has unused capacity.
He explained that since consumer spending is the main growth driver of the domestic economy other factors like investments should also be tapped to ensure further boost of the economy.
Consumer spending was boosted by the inflows from Filipinos abroad, which as of the first half this year rose 6.9 percent year-on-year to US$ 9.1 billion.
Last June’s amount registered a new high of US$ 1.6 billion or a growth of 8.3 percent, higher than the eight percent full-year forecast of the central bank.
Citi also noted a World Bank report stressing the need for new investments to ensure continued growth of economy and attain a seven-eight percent growth.
“One key assumption is that investments in needed infrastructure would persist to expand production capacity and lower logistical costs,” it added.
