MANILA - Governments should spend more on education and the health sector to speed up recovery in the region, Asian Development Bank president Masatsugu Asakawa said on Monday.
"I think what is needed is to have those poor people, vulnerable people participate in the recovery process, participate in the growth process, participate in the development process by securing high-quality jobs for them," Asakawa said during the 54th annual meeting of the board of governors.
"And from our point of view as an international financial institution, what is really needed to that end is to invest more and more in human beings. And more concretely, more investment in the education sector and health sector. Those sectors are very, very significant to ensure that our growth pattern is more inclusive and sustainable," he added.
Since the onset of the COVID-19 pandemic, the Philippines has boosted its isolation, quarantine, testing and currently its vaccination capacity through investments, donations and even foreign borrowings.
However, Asakawa said developing countries should be wary of accumulating debts which are at risk from monetary policy actions of developed countries such as the US.
A rise in interest rates could affect debts especially those denominated in the US dollar, he said.
Developing countries are under enormous pressure on their budgets and public debts resulting from large-scale countercyclical fiscal expenditures, the ADB official said.
"I’m not saying that’s not needed, that’s a bad thing. But resulting accumulation of public debt, especially if the debt is denominated in US dollars, would be my concern," Asakawa said.
"One perspective is if we look back at our history, whenever any developed country, especially the US, the country of key currency, starts to hike its interest rate in the context of monetary policy normalization, then quite often we saw huge impact put on the capital markets of both developing and emerging countries," he added.
The US, as the economy expected to lead global recovery, could move closer to normalizing its monetary policy.
In the first quarter of 2021 alone, the Bangko Sentral ng Pilipinas said it has approved some $2.84 billion in public sector foreign borrowings.
It's a "good idea" for developing countries to also rely more and more on domestic resources and reducing dependency on external finance, he said.
The Philippine economy suffered its worst economic contraction of 9.6 percent in 2020 due to the COVID-19 pandemic.
Although prospects were slightly positive this year, the recent surge in COVID-19 cases and the restrictions imposed threaten to negatively impact growth, experts have said.
The ADB has downgraded its GDP growth forecast for the Philippines to 4.5 percent from 6.5 percent this year.
Socioeconomic Planning Secretary Karl Kendrick Chua earlier said the country has enough time to "catch up" on its 7.5 percent growth target this year.
-- with a report from Warren De Guzman, ABS-CBN News