Coming up jasmine

ON THE drive from central Manila to the city’s main airport, the Philippine capital’s heavy traffic descends into full-scale chaos. The culprit is not the usual rash of breakdowns or sticky-fingered traffic cops, but the construction of a shiny elevated four-lane expressway leading to a new casino and resort.

The Philippines is on an infrastructure binge: 57 projects are in the pipeline (though contracts have been awarded for only seven) and next year’s budget allots 562.3 billion pesos ($12.8 billion), around 4% of GDP, to infrastructure, with a further 802.9 billion pesos planned for 2016. The splurge is an attempt to maintain economic growth fed in part by a recent surge of foreign direct investment (FDI). Money flowing into the country has tripled since 2010, when Benigno Aquino was elected for a non-renewable six-year term as president. But at 1.4% of national income, FDI remains low by regional standards; it is the measure by which the Philippine economy has long been found wanting.

Yet this may change. After years of puttering along as the tiger economies in the region roared, the Philippines is finally showing some growl of its own. Between 2008 and 2012, GDP grew by an average of 4.7%, rising to 7.2% in 2013—higher than any East Asian country except China—despite being hit by one of the most powerful typhoons ever recorded.

The World Bank forecasts growth of nearly 7% both this year and next. And in May S&P, a rating agency, raised the mood further by increasing the country’s long-term credit rating to BBB, two notches above the investment-grade baseline and higher than India and Brazil.

Agost Benard of S&P says the new rating is the result of stable politics and better governance. The days of popular oustings of presidents—the last overthrow was in 2001—are distant. Revenue growth has exceeded GDP growth for the past three years, thanks in large measure to Mr Aquino’s reforms of the internal-revenue service and the customs bureau. Investment and private consumption also posted strong gains in 2013, both aided by remittances from Filipinos working abroad. These have risen steadily since 1998, and in 2013 topped $25 billion, equivalent to around a tenth of GDP. An influx of tourists, lured to scenic beaches and jungle treks, has helped.

But concerns remain. Inflation hit a 33-month high of 4.9% in July, prompting the central bank to raise interest rates for the first time in over three years. Corruption remains endemic despite official campaigns to stamp it out. The Philippines still falls in the bottom half in the Corruption Perceptions Index kept by Transparency International, a lobby group. It does similarly badly in the World Bank’s “Doing Business” table: starting a business in the Philippines can leave entrepreneurs mummified in red tape. Foreign investors are frustrated by rules limiting them to 40% stakes in local firms. Those who invest anyway fret about the expensive electricity (when it is available) and poor infrastructure, notably the creaking ports.

Jim Yong Kim, the president of the World Bank, said the Philippines could be “the next economic miracle in Asia”. It would help if growth were felt by the poorest residents; at the moment, poverty rates remain stubbornly high. Much employment still happens in the informal sector. Some wonder where the rapidly-expanding labour force—a result of having a median age of just 22.3 years, five years lower than its South-East Asian neighbours—will find jobs. A youth bulge can be a great asset for an economy. Without jobs, however, it can turn into a liability very quickly.