El Niño, wars abroad, China tensions to try gov’t aims this year
The Philippines leaves behind 2023 with the goal of becoming an upper middle-income economy in this New Year – something it could have reached in 2022 had the COVID-19 pandemic not hit.
But President Marcos’ hopes for a “Bagong Pilipinas” on the second full year of his term will rest on the impact of El Niño and climate change, the developments in wars abroad, the conflict with China in the West Philippine Sea, and even talks about Charter change in Congress.
The Philippine economy, which saw the fastest growth among major Asian economies in the first nine months of 2023, is projected to surpass that pace next year, although global risks are seen tempering the outlook, officials said.
Last June, Socioeconomic Planning Secretary Arsenio M. Balisacan said the country was likely to achieve its goal of becoming an upper middle-income economy by 2024 if the economy grew by 7 percent in 2023.
An upper middle-income economy is defined as one with a Gross National Income (GNI) per capita, calculated using the World Bank Atlas method, of more than US$4,125 but less than $12,736.
But the Development Budget Coordination Committee (DBCC) revised its 2024 growth target range to 6.5 percent to 7.5 percent, down slightly from the initial 6.5 percent to 8.0 percent estimate.
The adjustment acknowledges headwinds from a potential global slowdown, the El Niño phenomenon, natural disasters, and geopolitical tensions. It also retained the 6.5 percent to 8.0 percent growth assumption for 2025 to 2028, said the committee that groups the government’s economic managers.
Meanwhile, even as Mr. Marcos welcomed 2024 “with great optimism”, a drought enhanced by El Nino could put the economy in the mud and leave thousands of farmers in over 70 provinces without enough crops to harvest — and thus make millions of Filipinos hungry.
The state weather bureau already said that by March, 45 provinces could experience drought, 28 could be in for a dry spell, and six provinces in Mindanao could have dry conditions – all but three of the country’s 82 provinces having a water shortage of sorts.
Externally, the wars between Russia and Ukraine, Israel and Hamas in Gaza, and even Yemen and its Houthi rebels over ships sailing the Red Sea will weigh on the Philippines, as these will hamper vital imports and frustrate the plans of overseas Filipino workers who may need to find jobs at home instead, officials in the Foreign affairs and Migrant Workers departments said.
That’s not to mention the increasingly tense situation with China, which has stepped up its rhetoric against the Philippines as it frowns on the country’s warming ties with the United States and other Western allies.
President Marcos has used the US, the European Union, Japan, Australia, and other like-minded nations to hedge against Beijing’s attempt at hegemony in the South China Sea. But it has so far not stopped China from asserting its dominance even in the West Philippine Sea – Chinese ships have gone so far as to enter Ayungin Shoal, where the BRP Sierra Madre lies marooned still.
But perhaps no other local development will be as closely followed in 2024 as the House of Representatives’ attempts to revise the Constitution, as Speaker Martin Romualdez has said lawmakers are keen on introducing economic amendments to the Charter.
Senate President Juan Miguel Zubiri has said “Cha-cha” is not a priority for his chamber of Congress, but senators who are allied with the administration may prod him to meet halfway with Romualdez and congressmen and set in motion the first real changes to the Constitution in nearly four decades.
Growth in 2024, according to the DBCC, will be driven by private consumption, as inflation is expected to return within the target range; falling oil prices; robust public spending; greater investments lured by the country’s sound macroeconomic fundamentals, investment-grade credit ratings, and the implementation of structural reforms; and increased demand for Philippine exports as supply chain bottlenecks ease.
Balisacan said the government remained confident that the lower end of the 2023 growth target range of 6.0 percent to 7.0 percent would still be achieved.
“Again, we need to grow by at least 7.2 percent in the fourth quarter to achieve the official target,” he said, noting that in the first three quarters of 2023, the real GDP per capita already recovered and exceeded its pre-pandemic level.
“This growth momentum is expected to continue for the rest of the year and surpass that of our neighboring countries,” he said.
Finance Secretary Benjamin Diokno also remains optimistic, citing the country’s “sound macroeconomic fundamentals, investment-grade credit ratings, and the implementation of structural reforms” as key drivers of growth.
“Pursuing a whole-of-government approach and a whole-of-society approach, we will strive to implement targeted measures, structural reforms, and strategies that will create a sustainable and future-proof economy for a significant improvement in the quality of life of Filipinos,” it said.