The first three quarters of the 2016 had been pretty much the same on the local economic landscape, boring if one could describe such, but still not unpleasant. In October, the overall gross domestic product was at 7.1 percent, even better than China’s 6.7 percent.
However, internal as well as global events during the middle part of the year, especially towards the closing of 2016, were instrumental in dragging down the performance of key economic indicators.
Among the biggest newsmakers happening during the last quarter were the peso’s weakening, dragging it to a yearend low of close to P50 per US dollar, and the withdrawal of foreign equity in the stock market, which dragged the index from a high of 8,000 at the end of 2015 to lower than 7,000 by end 2016.
It should be noteworthy to mention that these had been largely influenced by the change in leadership in the Philippines in July, and with the election of Donald Trump in the United States, which represented a seeming shifting of the world’s biggest economy to protectionism.
It also did not help that the global economy continued to be weak and still unable to recover from the global financial crisis of 2008, while oil-producing countries successfully reached an agreement paving the way for them to once again play a pivotal role in influencing crude price changes.
Not worth gloating about
We understandably are still seeing the results of the past administration’s efforts at bringing effective changes to the Philippine economy, and it is not surprising for the Philippines to be acknowledged as the fastest growing emerging economy in Asia in 2016.
Amidst the general malaise besetting the world economy, the Philippines’ GDP levels continued to rise, although it had done so at decreasing rates. Again, this is to be expected of any economy that has started at a lower base, but has consistently performed well.
This year, the Philippine GDP growth is seen to be on track to hitting 6.5 percent, an impressive leap from the 5.9 percent posted in end 2015. The first half performance can be attributed to election spending, which traditionally pump-primes the economy.
It must be noted that while the contribution of the business process outsourcing sector continued to strengthen, remittances from overseas Filipinos living or working abroad showed little changes, and even dipped slightly during one month in the year.
Exports continued to be sluggish, especially with China joining the rest of the world in exhibiting weak growth. Our agriculture sector once again showed signs of further deterioration in productivity, which is also a key indicator in determining inclusive growth in the country.
Overall, the growth that we achieved in 2016 is something not worth gloating about, and were it not for the elections, the Philippines would likely have performed below the targeted growth range – which had happened in the previous years of the Aquino administration.
A populist president’s biggest weakness is making sure his campaign pledges are met no matter the price. And while the new Philippine president had pretty much declared he would leave the nitty-gritty of economic management to his hand-chosen Finance secretary, election promises had to be kept.
During the first six months of the current administration’s term, the economic team pretty much spent most of its time trying to determine what new tax revenue generating schemes would best fund an election pledge to reduce personal and corporate taxes, estimated to dent the state coffers by a hefty P170 billion.
This is on top of other campaign promises like increasing pensions of the Social Security System’s retirees by P2,000 in two equal installments, which would reduce the life of the fund to only 2029 if no countermeasures are adopted.
The more important tasks of fiscal management have been put on the back burner, in the meantime, and this includes the all-important and much delayed corporate tax structure restructuring and streamlining of bureaucratic process, all of which are intended to raise the Philippines’ competitiveness in the world market.
The fourth quarter of the year hinted at some strains for the economy, most noticeably as the consumer price index showed a slight uptick. For the first time in so many years, Filipinos were seeing prices of basic commodities, including some food items, rising by double digits.
This was complicated by the deterioration of the peso as well as the rise in prices of petroleum products at the pump. This triple whammy comes at a time when remittance levels seemed to have reached a plateau, and the BPO sector faces uncertainties as a result of the U.S.’s possible repatriation of call centers to the mainland.
Being an economy heavily dependent on imported goods, the rising crude prices in the global market as well as the strengthening of the U.S. dollar weighed heavily on consumer items.
So much uncertainty
So much uncertainty shrouded the mining sector during second half of the year with the appointment of a known anti-mining advocate as the new Secretary of the Environment and Natural Resources.
Thus, the year ended with so much insecurities and doubts, mirrored in the business sector’s now growing hesitancy about relying too much on the vaunted strength of the Philippines’ economic fundamentals.
On many vital fronts, cracks have started to show, something that had not happened in the last two decades. Will these cracks turn into fissures that would be difficult to patch up and mend? More up for discussion in the next column.
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