The recent announcement that this country’s GDP (gross domestic product) grew by 7.1. percent in 2016’s third quarter was quickly seized upon by the spokespersons of the Duterte administration and touted as evidence of the Duterte administration’s excellent management of the economy. This is not right. The good performance of the economy in the third quarter—and, cumulatively, in 2016’s first three quarters—cannot be credited to the new administration. There are two reasons for this non-crediting.
The first has to do with the economic concept of leads and lags. Under the lags part of the concept, an economic activity usually yields the sought-after results only with the passage of time—months, even years, after the initiation of the activity. What this means in the current context is that the good third-quarters performance of the economy is the result of efforts expended not during the present administration, which is only five months old, but during the period before June 30, 2016. President Duterte and his people definitely cannot claim credit for the 7.1 percent third-quarter GDP growth, which apparently was Asia’s highest for that period.
The other reason why the present administration cannot be credited for the economy’s splendid performance in the most recent quarter of 2016 is that Rodrigo Duterte and Co. have done next to nothing for the Philippine economy. In point of fact, one should be speaking of what the present administration has done to the economy.
The bad economic climate that the present administration—the thousands of drug-related killings, the so-called pivot away from the US and toward China and Russia, the attack on the UN and its operations in the Philippines, the careless talk about martial law and suspension of the privilege of the writ of habeas corpus, the threat to disengage from the UN climate change treaty, the negative attitude towards the mining industry—have given rise to uncertainty in business circles here and abroad, which in turn have led to a slowdown in FDI (foreign direct investment) decision-making and a progressive weakening of the peso. The Philippines was already close to the bottom of the Asian FDI ranking.
If not to the Duterte administration, to what does the nation owe the economy’s 7.1 percent third-quarter GDP growth?
Three factors, principally. The first is the continuing strong inflow of OFW (overseas Filipino worker) remittances, which in recent months have totaled around $2.1 billion per month. The second factor is the BPO (business process outsourcing) industry, which really took off during the presidency of Benigno Aquino III. The third—and not the least important—factor was the climate of stable and certain governance that characterized the Aquino years.
The Duterte administration is almost into its sixth month in office but it has still to show any significant accomplishments in the sphere of economics. That being the case, Rodrigo Duterte and his people will still not be able to claim credit if the fourth-quarter GDP growth rate again displays much vigor. That will still be a lagged carryover of the accomplishments of the preceding set of national economic managers.
E-mail: [email protected]