The Philippines has better economic growth prospects this 2016 for a number of reasons: one, election spending; two, we will have a new President; three, oil prices are down drastically; and four, the country’s major trading partners will either recover or continue with their recovery, economically.
Consumption—largely by households —is the mainstay of the economy. The economy (measured by GDP or the value of the output of goods and services) has been growing at an average of 6 percent per year under BS Aquino III not because he is an economist or that he is a good president. In fact, the opposite is true.
Were BS Aquino a little more hardworking, a little more sympathetic to the plight of the people, and a little less divisive, the Philippines would have been truly the tiger economy he claims the country has become.
In the last six years of President Gloria Macapagal Arroyo, an economist, growth was a stellar 6.5 percent, achieved despite the worst global recession, in 2008 and 2009 when Philippine growth rate faltered, to 4.2 percent and to 1.1 percent, respectively, after rising 6.6 in 2007.
Aquino never faced a recession, except in the talent and intelligence of his cabinet and the rest of the government bureaucracy.
Yet, in his first full year as president, in 2011, BS scored a home run, a scintillating growth rate of 3.7 percent, after coming from a whopping 8.65 percent growth rate in the first half of 2010—the last semester of Mrs. Arroyo, and 6.7 percent, in July-December, the first six months of Aquino III.
Why did growth collapse to 3.7 percent in 2011 from the whole year growth of 8.2 percent in 2010? Incompetence. Aquino didn’t spend some P149 billion money intended for infra, for two reasons—he thought it would be stolen anyway and he really didn’t know how to spend it. Every time you don’t spend, you harm the economy.
To window-dress the figures and to show that he is indeed a good economist-president, Aquino’s statisticians keep on adding the whole growth rate of 8.2 percent in 2010 to the 5.9 percent average growth rate in his first full four years in office (2011 to 2014) to show an average growth of more than 6 percent, or 6.2 percent.
How do you make it appear that growth under Aquino was above 6 percent? Simple, add 8.2 (the growth in the whole of 2010) and 5.9 (the average of four years, 2011 to 2014), you get 14. Divide 14 by two, you get 7.05 percent. You then claim that this is the highest five-year growth since the 1970s. This is the claim of Economic Planning Secretary Arsenio Balisacan.
Even if you add only the second half of 2010 growth of 6.7 percent plus the 5.9 percent during 2011 to 2014, you still get an average growth of 6.3 percent. But the growth rates of 7.3 percent and 6.1 percent in the third and fourth quarters of 2010 should still be credited to the spillover effects of reforms under Arroyo.
The first six months of a president (July-December in Aquino’s case) is usually a learning period and nothing concrete could be done. The highest quarterly growth rate under President Arroyo was 8.9 percent—in the second quarter of 2010; her second highest, 8.4, was achieved in first quarter 2010.
In contrast, Aquino’s highest quarterly growth rate was 7.9 percent in the second quarter of 2012. Since then, GDP growth has steadily declined, reaching a low of 5.2 percent in the first quarter of 2015, before making a technical correction at 5.6 percent in the second quarter and 6.0 in the third.
Average GDP growth during the first three quarters of 2015—a disappointing 5.6 percent.
If fourth quarter (October-December) growth is 6 percent, then the whole year 2015 growth will be 5.8 percent, the lowest since the 3.7 percent growth in 2011, Aquino’s first full year, and the lowest in three years, since the 7.1 percent in 2013.
The Manila-based Asian Development Bank estimates the whole year 2015 growth at 5.9 percent, disappointing. Even a 6-percent rate for 2015 is disappointing because Aquino’s economists have targeted a growth of 7 to 8 percent in 2015.
The World Bank predicts 6.7-percent growth for the Philippines in 2016. That, however, will still be no thanks to Aquino. A higher growth rate will result from big election spending and the euphoria that welcomes a new administration.
The 2016 presidential election has tightened between Vice President Jejomar Binay and Senator Grace Poe. They have identical 26-percent voter preference in the December survey of pollster. A close fight can only mean higher election spending. For the administration candidate Mar Roxas to win creditably he has to spend more money than either Poe or Binay both of whom are backed by Big Business.
The BS A administration has more than P500 billion of unspent infra money. That has to be released in the first semester of 2016 to show BS A has achieved something and to polish the lackluster Mar Roxas’ sagging image.
For his part, Economic Planning Chief Balisacan says “with the recent performance of our economy for three quarters of this year, we are confident that we shall see this high growth pattern continue and even improve throughout next year and the succeeding administrations, given the reforms and long-term investments in infrastructure and human capital, which we continue to pursue.”
Balisacan dismisses the below-target at 3.7 percent in 2011 on “external events that disrupted global supply chains, for example the tsunami in Japan, the severe flooding in Thailand, political stability in some Middle East and African countries, Euro debt crisis, and the sluggish recovery from the financial crisis. Internally, government under-spending contributed to the slowdown, as agencies adjusted to new budget processes.”
Please note that the economy has been growing every quarter since 1998, a total of 68 consecutive quarters or 17 years. Growth keeps taking place, global recession or not, because the Philippine economy is very strong fundamentally. Filipinos just love to spend and 80 percent of economic growth comes from consumption, not the brilliance or lack of it, of a President like BS A.
Balisacan likes us to believe that because of the Aquino president, Philippines has “become one of the fastest-growing major economies in Asia, just after India, China and Vietnam.”
In fact, the Philippines should be growing faster than either China or India. These economies are faltering. India growth has plateaued at 7.3 percent in 2014, 7.4 percent in 2015 and 7.8 percent in 2016. China’s economy is decelerating, from 7.7 percent growth in 2012 and 2013 to 7.4 in 2014, 7.1 percent in 2015, 7.0 in 2016, and 6.9 percent in 2017, per World Bank projections.
With the Philippines has been unable to pump up infra spending, Vietnam has caught up with us in economic growth, with 6.5 percent in 2015 and 6.6 percent in 2016.
Meanwhile, oil prices have dropped dramatically, to 11-year lows in December 2015, to $36 a barrel, largely because of reduced demand even as supply keeps rising. Since 2014, oil prices have been cut by half.
This is a good for an oil-importing country like the Philippines. Cheaper oil means cheaper food. Since food is half of consumer expenditure, households will save money, on both fuel and food. That savings will be pumped into the economy, since Filipinos just love to spend.
Happy New Year!