• Reading time:8 mins read

This will be, economy-wise, a mediocre presidency

WHAT an unlucky country we are.

Going by the recent data and analysis of the World Bank, the term of President Ferdinand Marcos Jr., in terms of the economy, would likely be a mediocre one.

In the World Bank’s December 22 Philippines Economic Update, our GDP (gross domestic product) will register a 7.2-percent growth this year. “The reduction in Covid-19 cases paved the way for an economic reopening that, along with election-related activities, spurred domestic demand. Campaign activities boosted travel, accommodation, information and publishing, and communication industries. The removal of stringent containment measures led to improved employment outcomes to pre-pandemic levels and allowed for the release of pent-up demand,” the institution remarked.

World Bank forecasts of economy under Marcos. PHOTO FROM WORLD BANK

There will be no such favorable factors though in the coming years, the World Bank said. Worse, global growth will “decelerate in 2022 and 2023, reflecting synchronous monetary tightening, worsening financial conditions and continued disruptions due to the war in Ukraine. These external challenges have channeled through the Philippines in the form of high inflation, peso depreciation and capital market volatility.”

With the weakening of the pent-up demand that resulted in a 7.2-percent growth in 2022 and the global “economic headwinds,” the Philippines GDP will slow down to just a 5.4-percent growth in 2023 and 5.9 percent for 2024 and 2025, according to the World Bank forecasts.

Add to that President Marcos’ insistence on being Agriculture secretary, which has practically debilitated that crucial agency in influencing food prices. This worsened inflation, logged at 8 percent in November β€” the highest in 14 years β€” as food prices accounted for 59 percent of the increase in prices.

Add to that the government’s bungling of the San Miguel energy firms’ quagmire due to astronomical coal prices (due to the Ukraine war and the diminution of its natural gas supply from Malampaya). This could lead either to power outages or high retail electricity prices, which could weaken economic activity.

These certainly do not reflect the kind of leadership the country needs to help spur economic growth.

I am even doubtful if the World Bank’s forecasts are accurate, going by its own figures. Agriculture for each of its forecasted years is essentially stagnant, growing at a sordid annual rate of 0.1 percent. The growth rate of industry ranges from 1.3 percent to 1.8 percent, while for service, from 4 percent in 2023, 4.2 in 2024 and 3.9 percent in 2025. How could those kinds of growth rates of the three major industries β€” all below 4 percent β€” lead to a GDP growth for each year from 2023 to 2025 of more than 5 percent?

Using the World Bank’s figures, average GDP growth therefore for 2022 to 2025 β€” practically the whole of the Marcos administration β€” will be just 6.1 percent. This would be lower than the 6.4-percent average rate during the Rodrigo Duterte presidency β€” if one excludes in the computation the 9.5-percent decline in 2020 entirely due to the disastrous impact of the Covid-19 pandemic.

To give these figures some perspective, the World Bank report in its August update estimated that Vietnam’s economy grew at a faster rate of 7.5 percent in 2022, and forecasted a 6.7-percent growth in 2023. This averages to 6.9 percent, higher than our 6.1 percent.

Maybe mediocre is too harsh a word. Or perhaps all administrations have been unspectacular in terms of the economy as none managed to post a double-digit GDP rate even in just one year.

But at an annual growth rate of just 6.1 percent and with the current population of 111 million growing at 1.5 percent annually, we cannot expect a major change in our conditions, not a drastic reduction in poverty rates, not a leap to a China, Malaysia or even just Thailand levels.

China’s GDP per capita became bigger than ours starting in 2001, $1,053 compared to our $991, Thailand’s in 1983 and Indonesia’s in 2006.

These were due to double-digit GDP growth rates in certain years. China’s GDP grew from 1983 to 1985 by an average of 13 percent annually, from 1992 to 1996 by 13 percent, also annually, and from 2003 to 1007, by 14 percent annually. Such economic growth enabled China to undertake its “miracle” β€” as the World Bank put it β€” of lifting 800 million of its people out of poverty. South Korea’s double-digit growth rates were in 10 years starting 1976. Thailand had double-digit GDP growth rates from 1988 to 1990, averaging 12 percent per year.

In sharp contrast, we’ve never had a year of double-digit GDP growth. The highest growth rate we’ve logged was in 1973 and 1976, which had 8.8-percent increases in GDP β€” the main reason for Ferdinand E. Marcos Sr.’s tremendous political support in those years. However, because of the political and economic crisis, our GDP steeply contracted by 7 percent in 1984 and 1985 β€” the main reason for Marcos Sr.’s ouster. For the past 50 years we have the lowest average GDP of 4.1 percent in the region, excluding the war-torn countries of Vietnam and Cambodia.

Vietnam had a GDP per capita of just $423 in 1986 when we had our purportedly glorious People Power Revolution. The GDP per capita of Vietnam, a war-ravaged country, of $3,526 in 2020 overtook our $3,301 in 2020. The World Bank even subconsciously signaled its pessimistic view of our country in the covers of its updates. The cover for our December update titled “Bracing for Headwinds, Advancing Food Security” is a farmer shouting in pain. That for Vietnam is a robust stylized tree, titled “Educate to Grow.”

No wonder we are where we are. The main reason for the growth surges in other countries was not mere “macro-economic stability” with free markets, as the US and European ideologues, echoed by their local minions, claim. It was state intervention of a precise kind: government moves to protect a particular industry at particular periods since the 1950, and nurture it to become world-class.

China’s export processing zones, opened to foreign capital β€” while shielding the rest of the country through protective tariffs β€” gave its industrialization a boost. The Taiwan government focused on semiconductors, making it the biggest manufacturer of that product crucial to the digital age. The Korean government nurtured its conglomerates called chaebols to be able to manufacture electronic appliances and then automobiles. There has been this state-backed phenomenon even in recent years. China has been focusing on electric vehicles for a decade now, making it the biggest manufacturer now of that “car of the future.”

Unless Marcos undertakes some spectacular programs to boost the economy, we will not see the Philippines becoming a tiger economy, or even growing just to the levels of Malaysia and Thailand in our lifetimes, or those of our children.

Or is the Maharlika Investment Fund one of those major interventions we need? That discussion on Wednesday, and I guarantee you will be surprised.

Facebook: Rigoberto Tiglao

Twitter: @bobitiglao

Archives: www.rigobertotiglao.com

Book orders: www.rigobertotiglao.com/shop

This Post Has One Comment

  1. Dorina Rojas

    A lot remains to be seen. Please write more on this.

Comments are closed.