Friday, 29 October 2010

Large population may boost economic growth, says BSP

Ronnel Domingo
Philippine Daily Inquirer
First Posted 22:36:00 10/24/2010

MANILA, Philippines—A large population can be a blessing to the Philippines if this is harnessed to drive up domestic demand, especially at a time when emerging economies assume greater role in world economic recovery, according to Bangko Sentral ng Pilipinas Governor Amando M. Tetangco Jr..

“This can be an advantage if the purchasing power of the population can be improved,” Tetangco said in an interview over the weekend.

The size of a population is also an indicator of potential demand considering that the bigger the population, the higher potential demand there is, the BSP chief explained.

Citing data from the Asian Development Bank’s 2010 Key Indicators report, Tetangco said the middle class – defined as those with consumption expenses of between $2 and $20 daily at the value of money 2005 – has grown from about a fifth of the total Asian population in 1990 to more than half or 56 percent in 2008.

The ADB estimates that in 2008, the middle class had a spending capacity of $3.3 trillion, an increase of almost five times from the $721 billion in 1990.

“This purchasing power potential represents a powerful force for future growth,” Tetangco said.

He said this was a key consideration at a time when the disparate levels of development around the world are poised to normalize, as emerging Asian economies are growing stronger than developed ones.

To harness Asia’s strong growth as well as the rise of the Asian middle class, Tetangco said it is important for governments – particularly monetary authorities – to adopt longer-term policies towards strengthening domestic investment and consumption as well as exports.

He said that the exports sector continues to be a dynamic force in Asian economies given that, for many small economies, the domestic consumption base is limited and growth prospects are moderate.

Even then, Tetangco said domestic demand should be developed as a “second engine for growth” in order to promote broad-based, sustained growth.

“For growth to be sustainable and productive for future generations, consideration should be given to the environment-friendly policies and actions,” he added.

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