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Philippines' fragile economy
Publication Date : 07-01-2014
However Philippine President Benigno Aquino III and his economic managers crow over the resilience of the Philippine economy, there is no denying the fact that it remains fragile and very susceptible to disasters—natural and manmade.
There’s no question that, under the Aquino presidency, the overall economy has posted stellar quarterly growths averaging above 7 per cent since 2012. But this is more due to increased consumption than to higher investments in factories and infrastructure projects that generate plenty of jobs. True, the economy was the best performer last year among the emerging economies in the region, with an estimated full-year gross domestic product (GDP) growth of at least 7 per cent.
However, despite this impressive performance, the country’s unemployment rate hit a three-year high of 7.5 per cent, and the number of Filipinos living in poverty remained above 20 per cent. These are clear signals that the country’s economic growth has benefited the rich more than the ordinary Filipinos who bore the brunt of calamities that hit the Philippines one after the other in the latter part of 2013—Supertyphoon “Yolanda” in November (which devastated Eastern Visayas, killing more than 6,000); the 7.2-magnitude earthquake in October (that wrought havoc in the provinces of Bohol and Cebu); and the September siege of parts of Zamboanga City by heavily armed rebels of the Moro National Liberation Front.
On the other hand, the global outlook invites guarded optimism. The health of the country’s major global trading partners, particularly those of the United States, China, Europe and Japan, is expected to impact the local economy. Experts are divided on whether the recovery of the US economy will gain more traction in 2014; China has been forecast to slow down due to fears of asset-price bubbles after years of spectacular growth rates; and Japan’s economic recovery is unclear as well. Meanwhile, pessimism about the economic prospects of the euro area persists, with countries like Greece, Italy, the Netherlands and Spain all projected to achieve just modest growths this year.
In other words, reliance on trade and commerce with these major economies for growth in 2014 is not seen as a prudent option for the Philippine economy. Meaning, it must again rely on its own internal strengths. Notably, infrastructure has been a major source of job-generating growth. If only the government can speed up the implementation of several public-private partnership projects that were supposed to be on stream in the past year or so.
Indeed, things may not be exactly bad for the local economy this 2014, but they could be much, much better. Local and foreign economists are in fact bullish on the Philippines. American financial giant Citigroup has upgraded its 2014 economic growth forecast for the Philippines due to massive post-typhoon rehabilitation efforts that can spur public and private spending early this year. Citi said the country’s economy could grow 7.3 per cent this year, higher than its earlier forecast of 6.9 per cent. Japanese investment house Nomura has also raised its 2014 GDP growth forecast to 6.7 per cent from 6.2 per cent, reflecting its view that reconstruction efforts following Yolanda would intensify economic activity this year. They are all agreed that the country’s economy is built on strong fundamentals and that a combination of high economic growth, huge external surpluses, stable politics and positive reform prospects makes the Philippines a special case in the region.
Bangko Sentral Governor Amando Tetangco Jr. sums it up: “Sound economic fundamentals are the reasons why the Philippine economy will outperform those of neighbouring countries: Its current-account surplus owing to increasing OFW remittances, plus incomes from business process outsourcing and tourism; its growing foreign-exchange reserves and a stable banking system.”
Indeed, there are reasons to remain optimistic about the prospects of the local economy against the backdrop of a fragile global economic recovery. However, in our pursuit of economic growth, we would do well to keep in mind the business philosophy of Gawad Kalinga founder Tony Meloto and Cebu-based hotelier Manny Osmeña, which should also apply to the bigger economy: That for growth to be sustainable, everyone must also progress. Growth shouldn’t make only the rich richer while the poor get poorer.