The economy grew in average by more than 6 percent in the first three quarters of the year, the fastest in Southeast Asia except China. Because of Typhoon Pablo which destroyed a good amount of our crops in Mindanao, growth in the last quarter maybe slower than in the previous three quarters but it is already safe to say that the government will more likely hit the high end of the 5 to 6 percent gross domestic product (GDP) growth target it set for the year.
Inspired by the economy’s good performance this year, Socioeconomic Planning Secretary and National Economic Development Authority Director General Arsenio Balisacan, briefing the media, projected the economy to grow by 6 percent to 7 percent in 2012 and 6.5 oercent to 7.5 percent in 2014.
Where will growth come from?
“We hope to see a more vibrant industry sector and an improved manufacturing sector buoyed by the semiconductor and electronics industry, as the world economy is expected to recover between 2013 and 2014,” Balisacan was reported to have said during the briefing.
That also goes with construction which Balisacan expected to grow robustly in 2013 in view of the major public infrastructure projects that are taking off under the government’s flagship Public Private Partnership program which includes the implementation of a new terminal building at the Mactan International Airport in Cebu.
In the service sector, the main sources of growth will be the continuous expansion in the information technology and business process outsourcing industry, tourism, financial intermediation and trade, Balisacan said.
As in the past, household consumption would play a vital role in boosting domestic demand along with the expected expansion of exports, according to Balisacan. Capital formation, especially in the private sector, is expected to contribute a greater share of overall growth, Balisacan added.
The risks, Balisacan pointed out, include the unresolved fiscal troubles in the European Union (EU) which put it back into a recession this year and the sluggish growth in the US that allowed its unemployment rate to remain high for most of the year. Balisacan also admitted that the strong peso threatened Philippine export competitiveness.
I believe, however, that with the last decision in EU to provide more help to its beleaguered member countries and the reelection of Obama in the US who favors an activist government to stimulate the economy when needed, there is a strong possibility that the global economy may just grow faster again in the next two years. This should also boost Philippine economic growth via more export and investments.
Foreign direct investment (FDI) in the Philippines though is still a problem as it remains one of the smallest in Southeast Asia. This year, only about $1.5 billion in is expected to come to the Philippines, an amount which is even less than the monthly remittances that we received from our overseas Filipino workers.
The other problem is the structure of the Philippine economy – it is service oriented from the supply side and consumption oriented from the demand side. This may be all right in a high per capita income economy where most of the basic needs of the people are already met and where their most important concern is the consumption of goods and services intended for the rich.
It was the Industrial Revolution that powered the British to the top of the world in the past which the Americans also wrested in the last century because of their own success in modernizing and industrializing their economy. Japan’s entry into the developed world was also due to the rapid growth of its industries after its opening to the global economy in the second half of the 19th century. That so much was true also for Korea and Taiwan and the other high performing economies in Asia not so long ago. When China opened up after the death of Mao Tze Tung before the 1980s, it followed the same path for its development – industrialization.
Whenever I have the chance, I always say – look, in a service economy we buy and sell a lot of things but someone still has to produce those things like what China is doing, supplying to many countries in the world.
McKinsey’s latest report on manufacturing shows that in 1980 and 1990 China’s total manufacturing output ranked number 7 only in size globally. In 2000, it went up to number 4 and to number 2 finally in 2010. Being number 2 in size of manufacturing output also allowed China to become the second biggest economy in the world in terms of GDP now. Of course, the US, which accounts for the biggest share of global manufacturing output, is also on top in terms of total GDP up to now.
Lately, the US has gotten to be more service oriented on account of the need of its captains of industries to move their production bases to China and other developing countries where labor is cheap for more profits. The result is a stagnant, if not declining average income of the US work force. A great part of US income is earned by those working in the Wall Street, but in the rest of the US, poverty is fast emerging.
My fear is that unless we correct our deficiency in investment and the unfavorable structure of the economy, we may not be able to ride it for long when the global economy finally recovers.