ASIAN emerging markets, including the Philippines, can achieve higher growth by accelerating investments in infrastructure assets on top of enhancing infrastructure efficiency, S&P Global Ratings said.
“A marked improvement in infrastructure and logistics will support the next leg of growth for the emerging markets of Asia,” the debt watcher said in a report on Wednesday.
Asia-Pacific growth excluding China, S&P said, could grow from $6.6 trillion in 2023 to $11.4 trillion by 2033, reflecting an annual expansion of about 5.5 percent. The forecast assumes that better infrastructure will play a key role.
The report highlighted various infrastructure initiatives in the region, including in the Philippines, and noted that several governments had prioritized infrastructure development as a key policy.
“The National Economic and Development Authority (NEDA) coordinates flagship infrastructure projects such as a new airport in Manila, a heavy rail project linking ports in Subic, Manila and Batangas, and several highway projects,” S&P noted.
Earlier this year, the NEDA Board updated the list of Infrastructure Flagship Projects, trimming it to 185 from 198 with a total value of P9.14 trillion, up from the previous P8.8 trillion.
By the end of last year, 74 projects were being implemented, 30 had been approved for implementation, 10 were awaiting government approval and 83 were in project or pre-project preparation. Of the 74 ongoing projects, 19 are set for completion this year.
S&P noted that the public sector usually handles most of the responsibility for infrastructure projects, but added that this does not rule out a role for the private sector.
While Malaysia and Thailand have sizable public fixed investment assets, these were said to be low in the Philippines and Indonesia.
However, the latter two’s public-private partnership assets are larger than the global average, S&P said, at 6.7 percent of gross domestic product (GDP) for the Philippines and 4.2 percent for Indonesia.
The Philippines, along with India, also saw the largest improvement since 2014 among Asian emerging markets in terms of their scores in the Logistics Performance Index (LPI), the World Bank’s measure for infrastructure delivery.
“Improved logistics performance may support growth,” S&P said, adding that “there is positive correlation between an economy’s LPI score and GDP per capita.
“Improved infrastructure performance raises an economy’s productive capacity,” it continued.
S&P expects the Philippines to have one of the fastest economic growth rates in the region, matching Vietnam’s 5.8 percent and just behind India’s 6.8 percent.
“Economies can unlock higher growth rates through more infrastructure relative to the size of the economy and through more efficient use of that infrastructure,” the debt watcher said.
With growth comes the need to invest more, however, and economies will also have to grow their capital stocks to support higher income levels.
This will require replacing and maintaining depreciating capital, supporting the growth of the economy to ensure adequate levels of capital stock relative to the economy and growing capital stocks relative to the economy to unlock higher growth rates, S&P said.
The Philippines, along with Vietnam and Indonesia, could also see benefits from soft infrastructure initiatives such as streamlining regulations, process improvements, more efficient maintenance and enabling greater private sector participation
“The soft approach can yield material benefits and minimize lower direct public sector capital outlays,” S&P said.
“Vietnam, Indonesia and the Philippines have tighter bottlenecks around soft infrastructure and as a result may gain more from this area.”
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