“The coming administration will be incredibly optimistic.”
One thing about the incoming Ferdinand “Bongbong” Marcos Jr. (or BBM) presidency, it will be incorrigibly optimistic.
BBM comes to power on June 30, 2022 amid the most challenging and toughest crises ever faced by a new presidency—energy crisis, food crisis, war and geopolitical crisis, on top of the worst pandemic in a century that has yet to abate.
At least 1.1 million Filipinos will be impoverished by these multiple crises, according to the Asian Development Bank.
Officially, there are 3.87 million jobless Filipinos, the equivalent of 6.4 percent unemployment rate. This 6.4 percent unemployment rate is based on a so-called labor force participation rate of 63.8 percent—the ratio of working age Filipinos looking for a job.
The Philippines has 76.2 million who are 15 and above. They are the labor force or working age Filipinos. But the government says only 63.8 percent of those 76.2 million, or 48.6 million, are looking for a job, leaving 27.58 million Filipinos in limbo—they are jobless but the government says they are not looking for a job and therefore, they cannot be counted as jobless. How neat is that?
In effect, the Philippines has 27.58 million jobless but not looking for a job plus 3.87 million officially jobless Filipinos—a total of 31.45 million Filipinos. We have 31.45 million jobless Filipinos—no bullsh*t. They don’t have jobs, plain and simple. They are hungry, malnourished, angry, restive.
BBM inherits the anger of those 31.45 million jobless Filipinos. Readily, he doesn’t have the jobs available to employ them instantly. Why? The economy has been hit by multi-faceted crises.
On Tuesday, May 31, 2022, crude price hit $119.15 a barrel, paced by Brent crude which touched $123.80 per barrel. The $119 is almost double the $63 average in mid-August 2021. When oil prices hit the hilt, they raise the price of nearly everything, especially food. You need fertilizer to grow food. Fertilizer comes from crude. You need transportation to bring farm products to markets. Transportation is fueled mainly by oil.
In an average Filipino consumer basket, food is about 50 percent, if not more, of spending. Half of every consumer peso is spent on food. Another 20 percent is spent on utilities, basically oil. So 70 percent of consumer spending has been raised by record high energy prices.
At the same time, a third of the food needed by Filipinos is not available nor produced locally. It must be imported. But overseas, supply has been cut back and prices have risen astronomically.
So where does the government get the money to buy much higher priced energy and food supplies? That’s the problem.
The Duterte administration cut income taxes for business, big and small, and for 99 percent of all taxpayers. The idea is for businesses to reinvest their tax savings so they create jobs. Business did not do that. Instead, businessmen declared the tax savings as profits and as cash dividends. The money was pocketed.
There is another source of money—borrowings. But the Duterte administration borrowed the equivalent of 63.5 percent of GDP or economic production, that is, P12.6 trillion debts. Debt-to-GDP ratio, pre-pandemic, was a sterling 39.6 percent in 2019. So 63.5 minus 39.6 is 23.9—the BBM administration must reduce debts by 23.9 percent of GDP or economic production. If GDP were P20 trillion, 23.9 percent would be P4.78 trillion.
The government must reduce debt by P4.78 trillion. This is a government whose 2023 national budget is P5.268 trillion. Imagine reducing that P5.268 trillion by P4.78 trillion; it will leave you with just P488 billion—money not even enough to pay for the salaries of two million government workers.
Now comes Benjamin E. Diokno as BBM’s finance secretary. He has no fear. In 30 years with the government, “I have seen all the crises,” he says, including a debt-to-GDP ratio of nearly 100 percent of GDP. “I have seen the worst,” the bespectacled outgoing Bangko Sentral governor says.
Having seen the worst, Ben looks at the bright side of things. They include:
• The International Monetary Fund no longer supervises the Philippine economy. PH is not a borrower; it does not need baby-sitting by IMF.
• The dollar reserves, at $107.9 billion, can buy nine months of importations, including energy and food. At its worst time, in the mid-1980s, the Philippines had barely $1 million in usable reserves.
• The government now has more tax collections.
To reduce debt-to-GDP ratio, Ben’s formula is to increase the size of the GDP, which means make the economy grow.
Indeed, in the first quarter this year, the economy grew by 8.3 percent, defying the expectations of all analysts.
In 2021, GDP growth was 5.6 percent. In 2020, the economy fell into a recession with a whole-year drop of 9.6 percent—the worst decline since the second World War. From -17 percent GDP decline in Quarter 2 2020 to 8.3 percent growth in Q1 2022—wow, that shows remarkable resilience and high growth potential for the economy.
That resilience gives Ben Diokno enough confidence to even promise to reduce poverty incidence from 18 percent (or 4.74 million families or 26.14 million Filipinos) early last year to 14 percent this 2022 and to single digit in the coming years. A poverty incidence of 14 percent of families is rescuing at least a million families (or 4.5 million Filipinos) from poverty. Assures Ben: ”We are almost there.”
Finally, the government can sell assets. Like the 646-hectare (6.46 million sqm) Ninoy Aquino International Airport which can be sold because San Miguel has a 2,400-ha., Asia’s most modern airport, coming up in five years.
NAIA sits cheek-by-jowl to the 100-ha Makati Central Business District where lot prices are P1.5 million per square meter. Multiply 6.46 million sqm by P1.5 million. Now, there is cash.
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