Bernardo M. Villegas
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I Forecast Right Or Wrong (Part II)

          Another reason why I am confident that I can be more often right than wrong in my forecasts is that I never fail to consult other forecasting experts all over the world.  One of the experts I have been recently consulting is Diana Del Rosario, a Filipina who issues forecasts for Asian countries for Deutsche Bank in Singapore.  I find her most recent report one of the most cleverly worded I have ever read.  She contends that the economic future of the Philippines remains to be bright precisely because of its shortcomings.  Puzzled?  Well, let me quote her:  “Ironic but true—the country (the Philippines) has and would in our view continue to gain from its shortcomings.  Lack of access to education and widespread poverty (arguably) have contributed to a population boom that is today a key strength of the economy, supplying labor to the rapidly expanding BPO industry, among others, and the force behind robust consumer demand.  The lack of quality jobs in the country has driven at least 10 million Filipinos to seek better opportunities overseas, but who have in turn become a source of steady remittance inflows to the country.  The Philippines’ decades long debt servicing struggles, which effectively deprived poor Filipinos of basic economic and social services for substantial debt repayments, has in turn pushed past administrations to achieve a strong fiscal position that the current Duterte administration is poised to leverage on.  And amid heightened external headwinds, the Philippines can continue to seek comfort in its resilience to some external shocks, which again can be traced back to its shortcoming.  In the current environment that is apparently moving against globalization, the Philippines’ failure to catch up with Asia’s export-oriented industrialization is conveniently turning out to be a blessing in disguise.  Likewise, the slow development of its financial sector and capital markets has in part kept household and corporate leverage low, placing the Philippine economy at a better position to withstand rising rates and weaker currency.”

         As someone who has been often referred to as the “prophet of boom” (not infrequently with some sarcasm),  I could have not said it more appropriately than Ms. del Rosario.  Our very imperfections have turned out to be major reasons for optimism about our economic future.  We have to, however, make sure we leverage on these shortcomings by more positive and pro-active measures.  That is where I would like to risk once again being wrong when I forecast a GDP growth rate that will average 8% or above annually in the next decade or so.  Where will the additional percentage points come from?  I am assuming that the Duterte Administration will be doing a better job than the last one in spending a much bigger percentage of the GDP on infrastructures, especially in the rural areas and in putting up more school buildings and public hospitals.  These larger expenditures will be made possible by a significant increase in tax revenues that will result from the tax reforms that can be in place before 2017 is over.  There will be more airports, tollways, seaports, multi-purpose dams, and railways that will be constructed under the Public Private Partnership (PPP) program at both the national and local government levels.    President Duterte will be able to work with Congress to amend the Philippine Constitution so that restrictions against foreign direct investments can be removed, leading to a doubling of the current level of FDIs, to at least match those that are pouring into our “non-identical twin” today, Vietnam.

         With improved infrastructures, another engine of growth will be both domestic and foreign tourism.  In addition to the more than 40 million domestic tourists we now have, the number of foreign tourists (especially from our Northeast Asian neighbors) can reach 10 million by 2022.  Better infrastructures in the countryside will also redound to increased productivity in the agricultural sector which will diversify more into other higher-value crops (in addition to bananas and pineapples) such as palm oil, cacao, rubber, coffee and high-yielding varieties of coconut that can be grown in such places as Palawan, Quezon, Mindanao, Bicol, Eastern Visayas, using the nucleus estate model perfected by the Malaysians in palm oil production.  The recent surge in the growth of manufacturing which is still predominantly based on the large domestic market for consumer good can be sustained with the inflow of more export-oriented manufacturing enterprises from Japan, Taiwan and South Korea that are relocating their operations from China that has lost its competitive advantage of cheap labor.  The benefits of the young, growing and English-speaking population will no longer be limited to the service sector such as business and knowledge process outsourcing.  Workers will increasingly be supplied to the manufacturing industries that will benefit from a larger supply of technical skills as a result of the educational reforms accompanying the move to the K to 12 curriculum.

         To make sure that growth will be inclusive, the Duterte Administration under the ten-point agenda will spend more on free quality education and health services for the poor.  It will organize small farmers—the beneficiaries of the Comprehensive Agrarian Reform Program that expired in 2015—into cooperatives or corporatives (using the terminology of the President of Land Bank Alex Buenaventura) or will encourage agribusiness enterprises to partner with small farmers in the application of the nucleus estate model, especially in Mindanao.  The Bangko Sentral Ng Pilipinas will promote more aggressively the financial inclusion program so that more people from the lower-income groups can have access to credit and banking facilities.  The Department of Trade and Industry, working closely with business chambers, be relentless in promoting small and medium-scale enterprises.  The Conditional Cash Transfer Program will address the basic needs of the poorest of the poor, linking the transfer of cash with the reduction of school drop-out rates especially in the rural areas.

            I am very much aware that I have gone beyond scientific forecasting and have presented a “wish list” of what I expect the Duterte Administration to do.  This is the other side of my being a prophet of boom.  After looking at what are statistically probable from the data that are processed by our econometricians and computer experts, I try to influence the future by making self-fulfilling prophecies.  By reiterating the positive pronouncements made by our government officials, I hope to encourage them to deliver on their promises so that bright forecasts will be self-fulfilling.  For comments, my email address is bernardo.villegas@uap.asia.