The Philippine Economy: Up, Down, What?

Ask somebody, anybody, from street vendors, media people, politicians, to businessmen, pundits, even economists, about the Philippine economic outlook for 2012 and you’ll get answers from one end of the spectrum to the other.

Understandably so. These are turbulent times. Nobody knows exactly.

Let me enumerate some of the more recent forecasts:

Cristino Panlilio, DTI Undersecretary: The prospect for manufacturing is very good because of the projects that we registered in 2010-2011. The country’s goal for higher exports of finished products would be supported by the government’s competitive strategies that aim to promote more finished products in selected industries.¹

Ruperto Majuca, NEDA Asst. Director General: The GDP was estimated to have grown only between 3.6 and 4 percent in 2011. In the fourth quarter alone, GDP grew faster than the third quarter’s 3.2 percent but the expansion did not reach 5 percent as it earlier forecast. Almost definitely, exports contracted due to the debt crisis in Europe and the logistics disruption in Asia.²

Miguel Varela, PCCI President: Expect positive growth in the economy in 2012 but government should ensure that policies be more flexible to meet investors’ needs. It appears that while our competitiveness ranking has been improving, the cost of doing business remains significantly challenging. We need a more proactive engagement with government in lowering the transaction costs and time involved in opening a business and in closing one as well.³

Babe Romualdez, Phil. Star Columnist: It would seem that 2012 will be a relatively good year for the Philippines despite the economic downturn that European countries are experiencing due to the continuing debt crisis. For one, remittances from our “unsung heroes” – the reliable overseas Filipino workers – are expected to grow with continued strong demand for our workers abroad.⁴

Amado Tetangco, Central Bank Governor: The Philippine economy is facing major risks from abroad that could limit its growth prospects in 2012. Although the country enjoys sound macroeconomic fundamentals, and strong domestic demand, the economy could still be hurt by developments in Europe, the United States and China. The 2012 global economic outlook has deteriorated and that there would be more volatility and uncertainty that could affect the Philippines.⁵

Edwin Lacierda, Presidential Spokesperson: Our concern should always be high inflation as it would mean higher prices and all those consequent factors. [Pressures on global commodity prices are seen to continue to abate amid weaker global growth prospects. Due to these developments, the Philippine economy is likely to face external headwinds in 2012.] We believe that we would be able to weather whatever storms that would be coming as long as we manage the economy properly. The Aquino administration remains optimistic that the inflation outlook will remain within the target range.⁶

Singapore’s DBS Group: The peso is expected to trade at 45.50 to the dollar in the first quarter of 2012 as it fails to resist the current of eroding legal tender in Asia. The local money is unlikely to buck the trend of weaker Asian currencies despite a relatively strong showing in 2011. [Current FX rate is P42.84:$1] ⁷

United Nation’s World Economic Situation and Prospects 2012 Report: In East Asia growth is projected to decline to 6.9 per cent in both 2012 and 2013. China, the biggest economy in the region, is also expected to slow down from 9.3 per cent to 8.7 per cent growth in 2012. A major deceleration from China, however, would represent a more pronounced slowdown for the rest of the region.⁸

Arangkada 2012 Forum: While Filipinos are competitive in the world job market, the country’s competitiveness has declined. The Philippines is being left behind by most neighbors in too many measures of competitiveness. The Philippines is on a downward trajectory in international competitiveness rankings.

There you are. So what do you think?

A few things we are quite sure of: The Foreign Direct Investments (FDI) to the Philippines is one of, if not the lowest in southeast Asia; our dollar reserves are at its highest due to limited government spending; our imports are much higher than our exports; our labor rates is one of the highest in Asia; our electricity rates is the highest in Asia; corruption, followed by bureaucracy, lack of infrastructure, and policy instability are still on top of the list of the factors why investments would rather go elsewhere; OFWs are still sending a ton of remittances and keeping the Philippines afloat; Filipinos are an optimistic bunch of people.

What about the Subic Bay Freeport? I would be excited to get my hands on the 2011 economic data from SBMA but, unfortunately, it is not yet available as of this writing. It should be by the time of the SOFA, though.

So what then should we expect the economy to be in 2012?

Because of the expected global economic impacts, it would, unfortunately, be down, not up. However, the bright side is that we would likely be doing better than a lot of other countries.

Yes, Filipinos, are a bunch of optimistic people. Me included.

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1. http://www.mb.com.ph/articles/347054/manufacturing-to-flourish-in-2012
2. http://www.philstar.com/nation/article.aspx?publicationsubcategoryid=200&articleid=771473
3. http://www.mb.com.ph/articles/347056/pcci-optimistic-growth-calls-investorfriendly-policies
4. http://www.philstar.com/Article.aspx?articleId=764939&publicationSubCategoryId=66
5. http://business.inquirer.net/36381/philippine-economy-faces-growth-threats-in-2012
6. http://www.pna.gov.ph/index.php?idn=&sid=&nid=&rid=400183
7. http://business.inquirer.net/36445/peso-seen-at-45-50-to-1-in-q1
8. http://www.pna.gov.ph/index.php?idn=&sid=&nid=&rid=399162

(SBFCC Newsletter Volume 17 Issue 2)