WHAT an unfortunate country we are.
Given the recent data and analysis of the World Bank, the term of President Ferdinand Marcos Jr. regarding the economy would probably be mediocre.
In the World Bank December 22 Philippines economic update, our GDP (gross domestic product) will register a growth of 7.2 percent this year. “The reduction in Covid-19 cases paved the way for an economic recovery that, together with election-related activities, stimulated domestic demand. for improved employment results to pre-pandemic levels and allowed the release of the raised demand,” the institution noted.
However, there will be no such favorable factors in the coming years, the World Bank said. Worse, global growth will “decelerate in 2022 and 2023, reflecting the synchronous monetary tension, worsening financial conditions and further disruptions due to the war in Ukraine. These external challenges are due to the Philippines in the form of high inflation, peso depreciation and capital market channels. volatility.”
With the weakening of pent-up demand leading to 7.2 percent growth in 2022 and the global “economic headwind,” the Philippines’ GDP will slow to just 5.4 percent growth in 2023 and 5 .9 percent for 2024 and 2025, according to World Bank forecasts.
Add to that President Marcos’s insistence on being Secretary of Agriculture, which practically weakened this crucial agency in influencing food prices. This worsened inflation, recorded at 8 percent in November – the highest in 14 years – because food prices accounted for 59 percent of the increase in prices.
Add to that the government’s bungling of the San Miguel energy companies due to astronomical coal prices (due to the Ukraine war and the reduction of its natural gas supply from Malampaya). This could lead to either power outages or high electricity prices, which could weaken economic activity.
These certainly do not reflect the kind of leadership the country needs to spur economic growth.
I’m even doubtful if the World Bank’s predictions are correct, according to their own figures. Agriculture for each of his forecast years has essentially stagnated, growing at a dismal 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 these types of growth rates of the three main industries – all under 4 percent – lead to GDP growth for each year from 2023 to 2025 of more than 5 percent?
If you use the World Bank’s figures, the average GDP growth for 2022 to 2025 – practically the entire Marcos administration – will be just 6.1 percent. This would be lower than the 6.4 percent average rate during Rodrigo Duterte’s presidency – if one excludes in the calculation the 9.5 percent decline in 2020 due to the catastrophic impact of the Covid-19 pandemic.
To give these numbers 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 predicted a 6.7 percent growth in 2023. This is average at 6.9 percent, higher than our 6.1 percent.
Maybe mediocre is too harsh a word. Or maybe all the administrations have been unspectacular in terms of the economy, as none have managed to post a double-digit GDP rate even in just one year.
But with 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 jump in a China, Malaysia or even just Thailand levels.
China’s GDP per capita has been greater than ours since 2001, $1,053 compared to our $991, Thailand in 1983 and Indonesia in 2006.
These were due to double-digit GDP growth rates in certain years. China’s GDP grew by an average of 13 percent annually from 1983 to 1985, by 13 percent annually from 1992 to 1996, and by 14 percent annually from 2003 to 1007. Such economic growth enabled China to perform its “miracle” – as the World Bank puts it – in lifting 800 million of its people out of poverty. South Korea’s double-digit growth rates were in 10 years starting in 1976. Thailand had double-digit GDP growth rates from 1988 to 1990, averaging 12 percent per year.
In sharp contrast, we have never had a year of double-digit GDP growth. The highest growth rate we have logged was in 1973 and 1976, which had 8.8 percent increases in GDP – the main reason for Ferdinand E. Marcos Sr. his enormous political support in those years. However, due to the political and economic crisis, our GDP increased sharply by 7 percent in 1984 and 1985 – the main reason for Marcos Sr. For the last 50 years, we have the lowest average GDP of 4.1 percent in the region, except for the war-torn countries of Vietnam and Cambodia.
Vietnam had a GDP per capita of just $423 in 1986 when we had our supposedly glorious People Power Revolution. The GDP per capita of Vietnam, a war-torn country, of $3,526 in 2020 surpassed our $3,301 in 2020. The cover for our December update titled “Bracing for Headwinds, Advancing Food Security” is a farmer crying out 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 growth in other countries was not only “macroeconomic stability” with free markets, as US and European ideologues, echoed by their local minions, claim. It was state intervention of a precise kind: government moves to protect and nurture a certain industry in certain periods since the 1950s to become world class.
China’s export processing zones, opened to foreign capital – while the rest of the country is protected by protective tariffs – have given its industrialization a boost. Taiwan’s government is focusing on semiconductors, making it the largest producer of a product crucial to the digital age. The Korean government nurtured its conglomerates called chaebols to manufacture electronic devices and then cars. There has been this state-supported phenomenon even in recent years. China has been focusing on electric vehicles for a decade, making it the biggest manufacturer now of the “car of the future”.
Unless Marcos does some spectacular programs to boost the economy, we will not see the Philippines become a tiger economy, or even just grow to the levels of Malaysia and Thailand in our lifetime, or that of our children.
Or is the Maharlika Investment Fund one of the big interventions we need? That discussion on Wednesday, and I guarantee you will be surprised.
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