My message in last Tuesday’s forum on Views and Prospects for 2012 was that last year was not as good as expected and that this year could actually be no better for the Philippines.
Consistent with the initial turnaround in the global economy from the 2008 to 2009 global credit crunch and output contraction, the Philippine economy grew by 8.4 percent and 8.9 percent, respectively, in the last two quarters of the Arroyo government or the first half of 2010. The new Aquino government followed up with a 7.3 percent growth in the third quarter and another 6.1 percent in the fourth. That was good enough for the country to achieve an overall 7.6 percent growth in 2010, the highest in post Marcos era. That growth came mainly from record expansions in foreign trade and investments as the global economy started to recover and from massive election-related spending which boosted local demand.
Last year was a different story, however. Mindful of the headwinds that were seen to break the continued recovery of the developed economies in 2010, the new Aquino government targeted the economy to grow only by 5 percent to 6 percent, later cut down to 4.5 percent to 5.5 percent as the headwinds got stronger. True enough, the global economy sputtered and brought down our exports. And as if that was not enough, the new government was very slow in using its funds which pushed aggregate demand lower. The new government said the slowdown was the result of its effort to avoid waste when projects are done without much precaution. True enough the economy grew only by 3.6 percent in average in the first three quarters of 2011.
We will know the performance of the economy in the last quarter of 2011 once the National Statistical Coordination Board releases its report by the end of this month. Basing on first-quarter figures, however, the new government would be lucky if it would hit the lowest range of its adjusted target in 2011 because that would require the last quarter to have grown by 6.9 percent or 7 percent. Nothing much happened to the economy in the just-concluded quarter that could possibly meet this. A number a little above or below 4 percent would be more likely.
This month is the time when economic forecast for the year is firmed up by such multinational institutions as the United Nations through its report on the World Economic Situation and Prospects for the year, World Bank’s Global Economic Prospects or the IMF’s World Economic Outlook, not to mention the forecasts made by private think tanks like Economic Intelligence Unit of the The Economist Magazine. Together, their report has only one message: the 2012 global economy is going to be no better than last year and it may actually go into a recession again as the European Union fails to provide the much-needed measures to stop its slide due to the vulnerability of its highly indebted members.
From an estimated 2.8 percent in 2011, the UN report now puts global gross domestic product growth this year lower at 2.6 percent. The reason is the projected decline in the EU economy’s growth to 0.7 percent from 2 percent in 2010 and 1.6 percent in 2011. The EU slowdown naturally impacts the growth of developing economies, which includes the Philippines. As a result, China, for example, which depends largely on the developed part of the world for its export, is also projected to grow only by 8.7 percent this year, down from 10.4 percent and 9.3 percent, respectively, in 2010 and 2011.
Weighed down by the projected sluggish growth of the developed economy, the developing economies are set to grow only by 5.6 percent this year, down from 7.5 percent in 2010 and 6 percent in 2011. The UN report projects the Philippines to grow by 4.4 percent this year or just a little higher than the 4.3 percent growth that it estimated in 2011. This is lower than the 6.3 percent projected growth for Indonesia or the 6 percent growth projected for Vietnam. Despite all these, the new Aquino government is optimistic that the economy will grow by 5 percent to 6 percent this year, which is again lower than the promise it made to achieve 7 percent or higher in GDP growth during its time that it believes necessary if we have to cut down our poverty drastically. But even this is not feasible if we go by what happened last year and in the past.
In the second half of the last century, there was never a decade when we grew faster than most of our neighbors. Because of our rapid population growth and slower GDP growth, our per capita income was also consigned to lie below that of our close neighbors in Asia. This largely explains why we still have much poverty in the country.
In 2010 our nominal GDP was measured at $ 199.6 billion. That makes the Philippines the 46th biggest economy in the world. In the same year, our population was estimated at 94 million, which also put us higher at number 12 in global population ranking. But because of this we ended up in 2010 with just $2,123 in per capita GDP which places us only in number 123 in global per capita GDP ranking.
We can cite many reasons for our misery. But many studies show that the level of investment is one of the critical factors determining an economy’s growth. So what do we have in investments? The database from the IMF’s World Economic Outlook show that Philippine investments ranged only from 15 percent to 25 percent of the GDP from 1980 to 2010, one of the lowest in our part of the world.
Finally, what is our performance in getting foreign direct investments? As contained in the last UNCTAD’s World Investment Report, from 2005 to 2010 the Philippines accumulated a total of S12.9 billion in FDI. Malaysia, however, had 30.4 billion, Vietnam, $36.5 billion, Indonesia, 47.7 billion, Thailand, $48.2 billion, Singapore, 144.3 billion, India, $156.1 billion and China, $ 37.7 billion. Now we know why.