The incoming economic team of President-elect Ferdinand Marcos Jr. on Sunday declared that the new administration will face multiple challenges when it assumes office on June 30, but “strong fundamentals and bright macroeconomic prospects provide room for optimism.”
“We have all heard encouraging statements from the incoming economic managers led by outgoing Bangko Sentral governor and incoming Finance chief, Benjamin Diokno, that our new administration will be taking off from sound economic fundamentals,” Marcos said, referring to a briefing he received from his economic team.
“It will not be an easy road ahead, but we are not without the necessary wherewithal and elbow room to manage the challenges,” he added.
Among challenges that the Marcos administration will have to deal with are the government’s COVID-19 exit strategy, soaring oil prices, accelerating inflation, the effects of the war in Ukraine, and a looming worldwide food crisis.
While COVID-19 stalled the Philippines’ momentum from pre-pandemic annual growth by at least 6-percent, “now we have bounced back and returned to our robust growth path,” Diokno had said, in a speech in Manila on June 13.
“The International Monetary Fund shares the view about the Philippines’ favorable economic prospects vis-à-vis its peers. In its latest World Economic Outlook report, the IMF projects the Philippines to post the fastest growth in the region this year at 6.5 percent.”
Diokno said the Philippines’ economy is outperforming those of its neighbors, growing by 8.3-percent in the first quarter of 2022, exceeding those of Malaysia, Indonesia, Vietnam, Singapore, and Thailand.
He noted broad-based expansion in the first quarter of 2022, with agriculture, forestry, and fishing growing by 0.2 percent; industry by 10.4 percent; and services by 8.6 percent.
Still reeling from the effects of the pandemic, the manufacturing sector is also performing aggressively with the S&P Global Philippines Manufacturing Purchasing Managers’ Index reaching 54.1 percent in May this year—the highest in over four years.
Consumer and business confidence are on an upswing: consumer sentiment is seen to hit 30.4 percent for the next 12 months, while the business confidence index is expected to hit 69.8 percent for the same period after rising to 59.7 percent in the second quarter of 2022.
The Philippines’ foreign direct investments, which came to $10.5 billion in 2021, are also on the rise in the first two months of the year.
Gross international reserves (GIR) as of end-April 2022 stood at $106.8 billion, equivalent to 9.4 months’ worth of imports, three times more than the minimum standard of three months that the central bank has to maintain.
Household consumption increased by 10.1 percent, while government consumption grew by 3.6 percent; exports and imports also improved with 10.3 percent and 15.6 percent expansion, respectively.
Employment has significantly improved, with 1.5 million jobs created from February to March this year, from an unprecedented 17.6-percent unemployment rate at the height of lockdowns in April 2020.
While massive spending was necessary as part of the government’s pandemic response, which resulted in higher debt-to-GDP ratio of about 63.5 percent, Diokno said he is confident debt will go down to 60.4-percent in 2024, two years into the Marcos administration.
“It is worth emphasizing that our current level of debt-to-GDP ratio is well below the figure for other economies, some of which have debts over 100-percent or even 200-percent of their GDP,” Diokno said.