The Philippines in 2050
From number 43 in 2010, the Philippine economy will become the 16th biggest in the world in 2050. This forecast is from HSBC’s report on “The World in 2050” released last January this year. Is this possible? Can we make it? What does it mean being in number 16? The HSBC itself has some answer if it is possible or not: “We openly admit that behind these projections we assume governments build on their recent progress and remain solely focused on increasing the living standards for their populations. Of course, this may be an overly glossy way of viewing the world, and we conclude there are a number of reasons our ‘World in 2050’ could turn out a little different.”
There are many possible reasons why its forecast may go nowhere? But before that, let us look at how the HSBC arrived at the Philippines becoming number 16 in 2050.
At the outset, HSBC grouped the country into three categories—the fast economies, growth economies and stable economies. The fast-growth economies are those that are at a low level of development but which have sufficiently strong underlying fundamentals so that they catch up with more developed economies with similarly strong fundamentals. The HSBC assigned the Philippines in this category together with China, India Malaysia and Vietnam, among others. The “growth” group, which are also set to outperform many of the developed world economies, includes Indonesia and Thailand, along with Pakistan because of sheer size of its working population. The stable group of countries offer more limited growth prospects. These largely include the high growth, ageing economies in the developed world, of which Europe fares particularly badly.
For the Philippines, HSBC says that it looks set for a multi-decade run of strong growth. In making this projection, HSBC admitted that it is not based on past performance but rather on certain conditions that Philippines, like the other countries in “fast growth” category, is already favourably situated and which it can continue to improve in the future. What are these conditions? These conditions the HSBC lumped them into what it called the nation’s economic infrastructure. These include the nation’s GDP per capita, education, life expectancy, fertility rate, rule of law index, government consumption, democracy index, and inflation rate.
From where they are now, they can either remain at their level in the future or improve to their full limit where all economies reach the “optimal” infrastructure. In its base-case scenario, HSBC assumes that each country succeeds halfway in eliminating its imperfections. This also assumes that governments continue to improve the underlying economic infrastructure, implementing reform, increasing education and so forth, and remain friendly with their neighbours.
Having said that, here is now HSBC’s projection of Philippine GDP growth that will allow it to become number 16 in year 2050. From 2000 to 2010, it projected the Philippines to grow by 8.4%; from 2020 to 2030, 7.3%; from 2030 to 2040, 6.6%; and from 2040 to 2050, 5.8%. Fantastic? Not if we consider how our high-performing neighbors achieve this in the last three or four decades. China’s GDP growth in fact averaged 9 to 10 percent in the last 30 years, with China and Vietnam also not very much behind. The knowledge of what was achieved by our neighbors was what prompted President Noynoy Aquino to target a 7 percent average GDP growth in his term which he said is needed if we have to cut down our poverty drastically that remained high at a fourth of our population up to now.
The HSBC expounded on the forces that allow the economy to grow like widespread education and a strong democracy, adding that the most potent recipe for growth is a country that scores highly on the fundamentals but currently has low income per capita. Accordingly, these economies should deliver the highest growth in income per capita as they “catch up” with those with similar fundamentals. Ranged again these, however, are some constraints that may derail a country’s march to progress. These include resource constraints; cyclical fluctuations, which if wrongly managed can lead to a prolong recession or depression; border barriers or protectionism, which may lead every country to suffer in the end, and war.
HSBC also said that economies with poor governance and low education will remain stuck in this low-income trap. How are we with our governance? It may be improving now with Noynoy but what about after him? As to our education, unless we go deeper into STEM or science, technology, engineering and math, I do not see much hope of our economy growing faster, which in the long run can only be sustained with technological improvement and not on mere increase in work force or investments alone.
Indeed, the reality maybe far from the projections made by HSBC for the country. Note that HSBC also talked of missing variables in its projection model that may be more crucial for a country. Each country may have also their respective baggage, if I may add. In our country, for example, we speak of free election and of democracy. But what kind of officials do we get if the result of the election is dictated more by the candidate’s ability to buy votes rather than his fitness in office? What kind of democracy do we have if the government is run only by the same political family group for many years?
Finally, if we become no. 16 in economic size, what does it really mean when because of our rapid population growth our per capita income will remain at low level?
