Bernardo M. Villegas
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How Soon the Economic Recovery? (Part 3)

          Despite the anemic growth the Philippine economy is expected to post in the next 12 to 18 months because of  the Government’s poor management of the pandemic, Philippine society as a whole has enough strengths, resources and resilience to be able to attain the status of an upper-middle income economy by 2023.  As recently reported by the World Bank, the pandemic thwarted the efforts of the Philippine economy to attain an annual  per capita income of more than $4,000  by 2021, because of the precipitous  drop of 11 percent in our Gross National Income (GNI) or 9.6 percent of GDP last year.  The World Bank stated, however, that It is still possible for us to become an upper-middle income economy by 2023 as our economy can start growing again at the rates of 6 to 8 percent by the second half of 2022. By 2023, our economy can resume the growth path of 6 to 8 percent (even more) as the economy  experiences the New Reality after the pandemic, building on a young, growing and an English-speaking population; abundant natural resources in agriculture, mining and tourism; and strong economic and financial institutions that have been a result of two decades of painstaking institution building by some of the best minds of the country, despite less than political leaders and institutions.

         The recent passing away of former President Benigno “Noynoy” C. Aquino III reminded us once again of the importance of institution building in the process of attaining sustainable and inclusive growth.  Economic officials who worked with him and knew him well were one in debunking the unfair label of “wimp” that was given to him by some of his detractors.  One good quality that he had as a leader was that he knew how to build on the accomplishments of his predecessors in the Presidency.  As National Scientist Dr. Raul Fabella wrote in the Business World, the average rate of growth of the Philippine GDP during PNoy’s watch was 6.2 percent, higher than the average during the watch of any other president in Philippine history.  One major factor for this accomplishment was, as Dr. Fabella wrote, his making the Private Public Partnership (PPP)mode “the main powertrain to arterial infrastructure.”  This is an example of the humble refusal of PNoy to not “reinvent the wheel.”  He just built on the Build Operate Transfer (BOT) strategy that was introduced during the Administration of former President Fidel Ramos.  Also, his giving very high priority to reducing mass poverty led him to scale up the Conditional Cash Transfer (CCT) Program that was started during the watch of former President Gloria Macapagal Arroyo. 

         If one can be optimistic that the Philippines will resume its role of  being one of the fastest growing economies in the world, after the pandemic has been put under reasonable control, say by 2023, one reason is that in economics and finance some of our most qualified and competent managers in the economics and financial fields have occupied high government positions  and have painstakingly, if slowly, contributed to institution building.  At least since 1986 (and even before) such government agencies like the National Economic Development Authority (NEDA), the Central Bank, the Department of  Finance, the Department of Trade and Industry and the Department of Public Works and Highways have been led by some of the best and the brightest among our professionals.  Even if we did not always have the best political leaders during these two decades or so (as we do not have at this very moment), these very competent and socially responsible technocrats have contributed to institution building which is part of what we can call the strong fundamentals of the Philippine economy.  For example, our Central Bank has been rated by international bodies for years on end as one of the best in the Asian region.  In the area of finance, we have been complimented for having exercised exemplary fiscal discipline for keeping our debt-to-GDP ratio at the level of 30 to 40 percent while many economies, both emerging and developed, reached levels of 100 to 200 percent of GDP.  Our fiscal deficit has also, before the pandemic, been kept at prudent levels of less than 4 percent.   It is important, especially for those who are justifiably very unhappy with the quality of our political leadership today, not to forget that we have institutions strong enough to withstand the antics and follies of an imperfect occupant of Malacanang.

         Independent observers of the Philippine economy have actually recognized some of these fundamentals to which I have alluded.  Before the pandemic, I tracked over a period of more than a decade accolades we have been receiving from international think tanks, credit rating agencies and financial institutions.  For example, some fifteen years ago, Goldman Sachs included the Philippines among the “Next Eleven” most promising emerging markets in the coming decades. The others were Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, South Korea, Turkey and Vietnam.  One common denominator among these eleven is the relatively large domestic market.  It is clear that one of the strongest fundamentals that not even the worst virus cannot erase is our demographic dividend.  Our young, growing and English speaking population will continue to be the source of our above-average growth in the coming years, thanks to the remittances of our OFWs, the large dollar earnings of the BPO-IT sector and a big domestic market that makes us partly immune to the ups and downs of the world economy (like China and Indonesia).  As late as November 2019, Oxford Economics ranked the Philippines as No. 2 among the “Ten Leading Markets that will dominate the global economy in the next decade.”  India was No. 1, Indonesia No. 3 and China No. 4.    In December 2020, the Centre for Business and Economic Research, a think tank in London founded in 2006, projected the long-term prospects of 193 economies till 2035.  The Philippines had the third largest improvement in rank (from 32 to 22) after Vietnam (from 37 to 19) and Malaysia (from 40 to 28).  In May 2020, the prestigious publication The Economist presented a list of selected emerging economies ranked on four measures of financial strength.  The Philippines ranked 6th, ahead of countries like Saudi Arabia, Thailand, China, Indonesia, UAE, India and Malaysia.  In June 2020 (already at the height of the pandemic), the Japan Credit Rating Agency gave us a credit rating of A- from BBB+.  I can only attribute these positive views coming from these independent international organizations to their recognizing that certain fundamental strengths of our economy  over the long run have enabled us to survive temporary crises like the pandemic or for that matter, the Great Recession of 2008 to 2012.

           The latest vote of confidence comes from another independent international organization, the Oxford Business Group.  In its 2021 Annual Report on the Philippine economy entitled  “A new vision for the Philippine economy after COVID-19,” we can read the following upbeat but realistic assessment:  “The Philippines is one of the fastest-growing economies of the past decade, averaging 6.4 percent per year during 2010-19.  Indeed, an expanding and youthful population, combined with reforms and an ambitious infrastructure program have made it an enticing investment destination.  Nevertheless, as is often the case in emerging markets, challenges regarding inequality—particularly the distribution of wealth and services—remain barriers to growth.  The COVID-19 pandemic tested the country’s resilience in 2020, impacting major sectors.   However, the government mobilized to support vulnerable industries with two major stimulus bills, which aim to create jobs and sustain growth in 2021.”  Indeed, the long-term future of the Philippine economy remains bright despite the dark clouds that have been created by the ineffective manner our Government has addressed the pandemic.    For comments, my email address is