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Sunday, February 25, 2024

More challenging times ahead

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“The major concerns of the people, as measured by recent surveys, such as high prices, unemployment, low wages — all ‘politica del estomago,’ will continue to bedevil us”

Our president is going to Saudi Arabia today, his 15th overseas trip in the 16 months he has been in office, to attend the inaugural summit of Southeast Asian leaders and Gulf states tomorrow.

He was hoping to pitch in for investments from the oil-rich Arab nations, particularly for the newly-created Maharlika Investment Fund.

These Arab nations have plenty of money to spare, and have created their own wealth funds out of largesse through the years from oil and natural gas.

But the summit is not expected to produce much results beyond the handshakes and the smiling photographs.

The Israel-Palestinian conflict has upbraided the summit, as the full attention of the Arab world is on the mayhem in their neighborhood.

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This must have weighed heavily on the president’s mind as he suspended the implementation of his controversial no-wealth fund just before he left.

Furthermore, the two government-owned banks which provided P75 billion in initial funding realized after the fact, or after releasing their contribution to Maharlika, that such funds would compromise their ability to comply with Bangko Sentral regulations on capital requirements.

Goodbye to farm credit and what little DBP spares for industry, P750 billion in loanable funds are now banked with Maharlika.

See what rushing Maharlika did, with hardly anyone in Congress saying nay?

Which brings me to my point in this article — there will be more challenging times ahead, whether for the last quarter when the celebratory mood of Christmas makes our people forget momentarily their poor plight (but for the Small Laude’s and their internet ilk).

I hate to sound pessimistic at a time when we should be spreading hope amid the dreadful events happening in the world these days, but such seems to be our fate, almost ‘Sysiphean’ despite leadership changes.

Inflation will continue to bedevil our efforts, with a likely dip this November as the rice harvests come in (absent any strong typhoon hitting the palay-producing regions), but caught in the seasonal uptick when the middle class spends whatever surplus purchasing power they have in that once-in-a-year phantasmagoria we call the Christmas spirit.

Food processing manufacturers have defied the DTI’s appeal to keep their prices steady until the end of this year, but for a handful who want to unload excess inventory that is nearing expiration.

As much as they may want to comply with the government’s appeal, higher costs of production, from raw materials to supply chain problems to logistics to interest rates and every other cost have gone up.

There is a slowdown in economic growth all over the world, and the Philippines itself is no exception.

High inflation will likely induce the BSP to increase interest rates if not by November, by the first quarter of next year.

These will dampen Philippine trade, exacerbated by the decline in Chinese demand for our goods.

Our biggest export, assembled semi-conductors, face rough sailing in the coming months.

Our fruit exports are saddled with increased costs of production, and in the case of bananas, the Panama disease or fusarium wilt which continues to pester our fields.

Then again, consumption expenditures, the main driver of our GDP, is on the downtrend, mainly because of high prices, as households tighten their belts with utilities and food eating up their budgets.

Rice, flour (and bread products) as well as other cereals, fish, eggs and dairy products, meat, vegetables (OMG!), sugar (despite all that sneaky importation), cooking oil, LPG, and corn or maize which is what our livestock needs to grow, even camote and cassava (which our trade secretary wants us to substitute for rice) — the list is almost endless.

Thus, what our economic managers keep touting as higher growth rates should be taken with many grains of salt.

They are ‘recovery’ growth rates, coming as they do from the huge declines in GDP due to the pandemic and the resulting lockdowns.

These ‘recovery’ margins pale in comparison with Vietnam, Indonesia, Malaysia, even Cambodia, whose economies have grown at a faster pace than their 2019 records, while the Philippines is yet on recovery mode.

And from high marginal growth in 2022, the GDP has begun declining in the first half of 2023, which is likely to continue on its downtrend.

Thus, the major concerns of the people, as measured by recent surveys, such as high prices, unemployment, low wages — all ‘politica del estomago,’ will continue to bedevil us.

El Nino is expected to worsen in December till the first quarter of 2024, so expect food inflation to increase once more in the first half of next year, even if the heavens do not destroy our ongoing harvest of staple food with strong rain and howling winds that have usually occurred during this weather phenomenon.

This will impact on our over-stretched financial resources, where our outstanding debt is already P14.7 trillion, and expected to increase by another P1.2 trillion on the basis of our recurring fiscal deficits, burdened by the soon-to-be-passed expenditure budget of P5.7 trillion, some P800 billion of which is classifiable as pork barrel.

Unemployment and under-employment is likely to worsen.

The PSA tells us that the unemployment rate is a measly 4.4 percent, but if you examine their basis for such a claim, you discover that their definition of an employed person is one who has worked for one hour in the past three months.

Yes, you read it right — one hour!

And don’t think of living wages, as IBON and other progressive organizations keep demanding. Employers cannot afford their demands, save for very few which employ college graduates with good academic records.

Even the ‘underground’ economy is reeling from cost push inflation and declining demand. Small and medium-scale enterprises which shut down during the COVID lockdowns have yet to get back on their feet, and those that have re-opened are now saddled with high costs and dread the specter of declines in demand.

Meanwhile, Israel and Palestine have added to the woes inflicted by the unending war in the Ukraine.

The economic impact of these conflicts, though geographically far removed from our shores, are incalculable even if China doesn’t roil the South China Sea with war, hopefully not, as that would be disaster.

So we say “good luck” to the new Cabinet secretaries who will be named after the long holidays, and before our president leaves again for San Francisco for the APEC summit with his presidential party unable to visit and shop in the downtown area, nor dine in Chinatown or the Embarcadero or gorge on seafood at Pier 39, now teeming with the riff-raff of American society — the homeless, the destitute and the hooligans.

Yes, let us all wish them luck as they try to manage through the challenges we all face: the new finance secretary, the new trade secretary, the new agriculture secretary, and even whoever will head what looks like a still-born Maharlika Fund.

Hope springs eternal, ne c’est pas?

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