Where is the economy heading?
We again talk much of the usual stuff that excite us easily—graft and corruption that pervades in almost branches of the government, including our local government units, the lapses in governance that includes cheating during election, the elusive peace in Mindanao, the never-ending debate on the Reproductive Health bill and Freedom of Information bill, and other divisive issues, like the revival of the proposal to change our charter. Despite the recent carnage in the local and global stock market, very few talk of the economy here.
Yes, Secretary Cayetano Paderanga was here last week for the first salvo of the Plan Caravan, which is intended to inform our people of P-Noy’s economic roadmap based on the newly completed Philippine Development Plan for 2011 to 2016. But what got more attention instead was the departure of the Tourism Secretary Alberto Lim from the Cabinet.
Indeed, what is happening to the economy now? Where is it going? So what?
Our more successful neighbors are now free from much of the poverty that characterized many of the countries in Asia after the last war. They did that not by prayer alone or having everyone win the lotto. They did it through hard work and better foresight of what they need to do to achieve what they want and grow faster economically in the process that also happened to be both inclusive and sustained for a good number of years.
We did experience our own good years in the past especially in the early years of our quest to industrialize through import substitution and protection of our local industries. However, failing to liberalize early on and unable to create a strong export sector out of our newly developed protected industries, our aim to industrialize as a vehicle to uplift many of our people out of poverty also hit a wall. We have not surmounted that wall up to now. P-Noy’s economic team believe that only through faster and sustained economic growth of at least 7 to 8 percent that massively create jobs at the same time can free us from our poverty. However, this may turn out to be just another pipe dream.
The economy galloped to an unexpected 7.3 percent annually last year. This is what the new administration hopes to sustain for the rest of its term. At 7 to 8 percent annual growth, our per capita income would be at least 30 to 40 percent larger in 2016 than what we already had last year. It may not be that mind-boggling, like what the Chinese are having now or what the Japanese and Koreans did earlier, but it would be enough at least to erase much of our poverty incidence from an estimated 26.5 percent of our population in 2009, based on the new method use to measure our poverty, to 16.5 percent in 2015. The new Philippine Development Plan is very explicit on this target. Unfortunately, instead of galloping, what I am starting to see this year is an economy that is going back again to our previous low growth path of less than 5.0 percent annually. After factoring our annual population growth, how much will be left of that to increase our per capita income? Just over 2 percent. With that, we have to wait 35 years to double our per capita income. And what do we know? Now our per capita income is only 40 percent of Thailand and 25 percent of Malaysia.
From 2001 to 2009, the PGMA administration recorded a 2.3 percent annual growth rate in our per capita income. That was not successful enough to put a dent on our poverty incidence. Indeed, while P-Noy’s economic team aims to grow the economy much faster at 7 to 8 percent annually and add a million new jobs a year up to 2016. Initial figures in the first quarter showed the economy growing only by 4.9 percent and that while 1.4 workers were added to the employed, more than half of them were actually underemployed. What about the three remaining quarters of the year and thereafter? As much as we want, it may not be necessarily higher.
Just look outside. The much-hoped faster recovery of the global economy from the last recession has not materialized. Many are even seeing the danger now of the global economy going into a second dip. The signs are there. In addition to the latest global stock fiasco, the US and the Euro countries have also reported much slower growth rates of less than one percent in the first half of the year. Until now, the unemployment rates in both areas remained above 9 percent.
As a result of the last financial meltdown that followed the collapse of the US housing market, the US and the Euro economies went down by 2.6 percent and 4.1 percent, respectively, in 2009. Last year they recovered only by 2.8 and 1.7 percent, respectively. Seeing that the global economic situation is no longer the same as the pre-crisis year, the IMF, in its 2011 Global Outlook, put the growth rate of the US and the Euro countries at about the same rates, respectively, also this year. Unfortunately, this may also turn out to be an overestimation.
The figures in the first of the year already showed the US and the Euro countries growing only by less than 1.0 percent. With this slowdown, many are again seeing another global recession coming. The Philippines naturally is not going to be immune from the fallout of the slowing or receding US and Euro economies. We are very much linked with them through our trade, tourism and investment. They go down, we have nowhere to go also but down. Hence, there is an urgent need to talk about the economy and what to do when the global economy starts to recede again.
But like what I said in the beginning we rather talk of other things.
