Bernardo M. Villegas
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Outlook for Second Semester 2023 (Part 2)

             The global and local macro conditions in the next five years are very similar to what prevailed during the decade just immediately before the pandemic struck, 2000 to 2019.   The whole world economy was just recovering from the Great Recession that started in 2008 with the collapse of the Lehman Brothers and other large corporate groups.  It is meaningful that during the 2010 to 2019 period preceding the pandemic, the Philippine GDP rose without fail at 6 to 7 % annually.  We are now experiencing the Philippine economy regaining its pre-pandemic strength.  Even if the highly likely event of a global recession in the next year or so will materialize, the Philippine economy will be able to grow at the Government’s target of 6 to 7% on the basis of what President BBM calls our strong macroeconomic fundamentals which are now being highlighted by independent global institutions like the World Bank, the ADB, the Japan Credit Rating Agency and a host of  private international financial institutions and think tanks.  Together with Vietnam and India, the Philippines is considered to be among the highest growing emerging markets in the Indo-Pacific region.  In road shows I have joined in selected countries with abundant long-term funds, the Philippines is targeted as a favorite investment destination, not for manufacturing, but for all types of infrastructures like airports, trains, subways, bridges, renewable energy, and water facilities. These are big-ticket items that will employ a lot of people and attract more investment in services that require efficient infrastructures like tourism and IT-BPO.  I highly encourage Philippine business people and entrepreneurs to join these road shows or organize their own to such countries as Spain, Japan, South Korea, Taiwan, the United States, Saudi Arabia and others with sufficient long-term investment funds to be able to partner with Philippine conglomerates  in putting up international airports, sea ports, railways, subways, tollways, renewable enery plants and large-scale agribusiness ventures.

            Instead of fretting about the temporary slowdown that the economy suffered during the second quarter of 2023, decision makers in both the private and public sectors of the economy should be focusing on the many investment opportunities that the medium-term offers, such as these numerous infrastructures projects that are now open to 100% foreign equity investment, the renewable energy sector and large agribusiness ventures that can employ tens of thousands of workers especially in the countryside.  Let us encourage more corporate groups like the First Pacific group, the DMCI holding, the Benguet group and a few others in their willingness to diversify their investment portfolio into large-scale agribusiness ventures like palm oil plantations, integrated coconut farming and dairy farming.  The BBM Administration should make sure that all the government departments that have to do with improving agricultural productivity, such as the Department of Agriculture, the Department of Agrarian Reform, the Department of Environment and Natural Resources and the Department of Local Government will be on the same page in implementing the strategies of land consolidation, product diversification, digitalization and industrialization of the agricultural sector.

            The second quarter of 2023 does not define what could happen over the next five years.  What will define the remaining years of the BBM Administration are a significant increase in agricultural productivity to allow the agricultural sector to grow at 2 to 3 % annually (a feat already accomplished by Thailand and Vietnam, two of our peers in the ASEAN), the entry of $15 to $20 billion of FDIs annually (already attained by Vietnam over the last decade or so) and a substantial improvement in good governance that will reduce the leakages of hundreds of billions of pesos in corruption especially in construction projects with the Department of Public Works, the purchase of materials and supplies in the Department of Education and Department of Public Health, and lost revenues in the Bureau of Customs and Bureau of Internal Revenue.  Even if the President does not deliver in many of the promises he made in the last SONA, closely following up just these  three critical objectives may actually enable his Government to go beyond the 6 to 7% current target and surprise us with an average of 8 to 10% for at least the last three years of his tenure.  A growth of 8 to 10% yearly over the next four years or so will make it easier to attain the target of the NEDA to reduce our poverty incidence from its still double-digit levels to single-digit of at least 9% (I would target at least 4 % which is now the average of our Southeast Asian neighbors).

            Let me point out that the Philippine economy is at a stage where the Chinese economy was in the early 1980s after Deng Xiao Peng introduced his game changing market-oriented reforms.  What happened then is well known to economic development scholars and historians.  The Chinese GDP started growing at unbelievable rates of 12 to 14% annually resulting in the liberation in a space of twenty years of anywhere from 600 to 700 million Chinese from dehumanizing poverty.  It is, therefore, not beyond the realm of possibilities that the Philippines—graduating from low-middle to high-middle income status in the next two years—can grow at 8 to 10% given parallel reforms in agricultural policies and programs, market liberalization, increased flow of FDIs (especially in critical infrastructures) and good governance.  For comments, my email address is