THE GOOD AND THE BAD SIDE OF RP ECONOMY

ONE VOICE

EVERY ECONOMY GOES On a roller-coaster ride. Validating the norm that what goes up must come down and vice versa. One other reason why Economics is called such a “dismal science”. Consider these.

The RP economy skidded to a low 5.6% GDP Second-Quarter growth rate as if to mirror an anemic First Quarter 5.5% growth -the slowest in 17 months. That certainly looks like a poor specimen versus the 6-7% p.a. targeted growth of government.

Blame the rapacious, greedy institution called Congress- (some members of) who is to blame for the late approval of the 2019 National Budget because of “illegal insertions”, a euphemism for “Pork Barrel”. Everyone knows the Supreme Court had clearly outlawed the “lardy one” since Noynoy’s time.

In finance, there is the so-called “time value” of money -where money spent earlier in the year impacts the GDP more than those spent in the latter part of the year. The year 2019 is an election year which should have energized the economy through election spending (media, campaigning) including vote-buying.

That means the impact of the Congressional greed far exceeded the impact of inflationary election spending in the first two quarters. Congress is to blame because as a NEDA Undersecretary Rosemarie Edillon posited- without the budget delay – the economy would have growth 6.5-6.6% in the first half of 2019. Or one percent higher than actual.

That essentially means- the economy has to grow by 7.5% in the last two quarters of 2019 to hit the average yearly GDP growth of 6.5%. Is that likely to happen? There are barriers.

The debilitating trade war between super-economies America and China is starting to slow down global growth. American stocks already collapsed by 3% on August 2 and China further devalued the yuan which could start an acrimonious ”currency war”, an aggravating circumstance.

With the UK weakening due to the Brexit and Germany and Italy ‘s economies seeing bad times, Europe could join America and China- resulting in a global economic slowdown.

Even if RP is not thoroughly trading dependent (but inwardly pushed by consumer spending for services), a global slowdown can affect us even in terms of investors’ appetite in making major bullish moves due to the global downturn.

Another item closer to home: unless the 10 million rice farmers’ problem due to the rice import liberalization law is addressed properly, poor Agricultural growth which already showed a shameful half percent growth in the 2nd Quarter- can continue to be a drag to the economy.

Overall, therefore, on the short-term horizon, it does not look too good for the RP economy right now.

Over the longer-term view, however, RP’s economy looks poised for good times based on the reputable McKinsey Report as bared by Ayala Corporation to the public in a forum sponsored by Finex.

The long-term forecast was predicated on a normal environment as in no massive climate change disaster, no shooting war in the South China Sea, no baby missile fired by North Korea and violent political upheavals in the country.

This is a really exciting good news for us.

For instance, in 2000 Asia accounted for only 33% of the global GDP; by 2040 Asia shall have been responsible for over 50% of global GDP and 40% of global consumption.

Whereas in the past, Asia’s top conglomerates were only 19% of the world total, from 2010-2019, they accounted for over 30%. What about RP?

In 1997 only 8 RP firms with $3-B in assets were in the top 500 global conglomerates; by 2017, there were 15 Filipino conglomerates at $27B. In 2000-2010 RP companies only raised $9-B in the stock market public money; by 2010-2019, it was 3x the size at $27B.

The biggest news is that by 2030, 58% of the Filipinos will be considered Middle Class (or from poor to Middle country)- predicated in the lowering of those under the poverty line to 16% by the year 2022.

A separate HSBC (Hongkong Shanghai Banking Corporation) forecasted that by the year 2030, RP will be the 27th largest economy among 75 selected large nations. How wonderful that sounds.

Fernando Zobel de Ayala thinks this can only be brought about by improving financial inclusion, and the quality of human capital by improving health care and education in this country.

Right now, a huge 70% of the 103 million Filipinos are still “unbanked” (neither depositors or borrowers), 33% are physically stunted at birth and 21% of children malnourished while there are still 3.6 million out of school youth and jobless rates very high due to mismatching of education and job demand, among others.

Financial technology and literacy, anti-poverty measures and improvement of the quality of education are three areas that, therefore, bear deeper watching.

In summary, bad short-term economic prospects but very bright way ahead to the future for RPeven as early as 2030. God be praised. Shalom! For comments: email to dejarescobingo@yahoo.com or bohol-rd@mozcom.com