Page last updated at 12:10 Asia/Manila, Monday, 16 December 2013 PH
Without trivializing the loss of even one human life, one can be glad that the tragedy that struck the islands of Central and Eastern Visayas of the Philippines last November 8 happened in 2013 when the country has finally shed its notoriety as the "sick man of Asia." The Philippine economy is in a much better position to meet the challenge of helping the stricken communities in the arduous task of rehabilitation, reconstruction and recovery. The Government has a very healthy fiscal position, with its deficit much below the prudent limit of 4% of GDP. The private banking sector is awash with liquidity, thanks to the quantum leap of the savings rate from the low levels of 18% in the 1990s and early 2000s to more than 30% of GDP, owing mainly to the remittances of overseas Filipino workers (OFWs) of more than $20 billion yearly. Inflation is below 3% and the international reserves are at an all time high of 11 months of import coverage, enabling the Central Bank to manage the volatility of the foreign exchange rate that is expected to hover at the P43 to 44 to a US dollar for the next year or so.
Given these new strengths of the Philippine economy that are ultimately based on a young, growing, educated and English speaking population, I am inclined to disagree with the Government that was quick to downgrade the GDP forecast for 2013. I still believe that the GDP can grow for the whole year at an average of 7.5% or over, despite all the damage wrought by super typhoon Haiwan, especially in the islands of Leyte and Samar. I have examined the sources of growth--the highest in the East Asian region, equal only to China's--of the Philippine economy in the last four to five quarters. First and foremost are the remittances of the OFWs, which in September 2013 alone jumped by close to 6% on a year to year basis. This growth that has significantly stimulated consumption spending has been sustained at the 5 to 6% level annually, even during the worst periods of the Great Recession that started in 2007. In fact, one can expect to see bigger inflows of these remittances in the last months of 2013 and the early weeks of 2014 as anxious relatives of the typhoon victims will dip into their savings to help in the recovery process, whether in the new communities where the homeless and uprooted will relocate themselves or in the very communities that were destroyed by the typhoon. There is also the usual lift in these remittances during the Christmas holidays when the OFWs become especially generous with their extra gifts. The increases in expenditures resulting from these inflows will compensate for the reduction of spending in the areas affected by the typhoon.
Another major source of growth is the foreign exchange earnings of the booming Business and Knowledge Process Outsourcing sector that now employs close to 800,000 well paid professionals. In an international conference of the call center industry in Asia, held two months ago in the island of Cebu, I heard top officials of this sector, both foreign and domestic, arriving at the consensus that the Philippines will continue to enjoy double-digit growth rates of both revenues and employment for the foreseeable future, bringing total employment to 1.3 million and forex earnings close to $20 billion annually by 2016, almost equal to the OFW remittances. This industry is concentrated in the Metro Manila area but has been slowly spreading out into the regions, especially in Cebu, Bacolod, Iloilo, Baguio and Dumaguete. Even the 1,000 workers in the call center that was totally destroyed by the storm in Tacloban can be readily absorbed by the new enterprises that are being put up in Cebu and other neighboring cities that were not seriously damaged by this strongest typhoon to have hit our planet in recorded history.
The third source of the rapid growth now being experienced by the Philippine economy was the significant increase in government spending on infrastructures which is quickly being upped from the low of 2% of GDP to the target of 5% of GDP by 2016. The Government is fortunate to have a Secretary of Public Works and Highways who is both completely honest and competent and is making sure that every single centavo budgeted for roads, bridges, and other infrastructures is actually going into them, especially in the countryside. Already having demonstrated a track record for the rapid construction, repairs and maintenance of these public works, the DPWH can be expected to act quickly in the rehabilitation of the infrastructures by the typhoon, with its budgets greatly enhanced from what used to go to the so-called "pork barrel" funds of Congress and, not to mention, the generous financial aids coming from foreign governments and international agencies like the World Bank and Asian Development Bank. (To be continued).