We are witnessing two significant developments in the world economy that will have a profound effect on how the Philippines will fare this year and even in the coming years.
First, the U.S. economy is hell-bent on bolting out of a depression that started in 2008 by banking on the populist leadership of President-elect Donald Trump. When he formally assumes office later this month, we could be seeing more changes.
The election of a populist demagogue came at a convenient time too, especially now that U.S. federal rates are once again climbing, and investors who had sought shelter in emerging economies during those dark days are already looking at better returns from an awakening America.
The second all-important turn of events is the rebounding crude oil prices, which had sunk to below $50 last year from a high of over $100 per barrel in previous years. The projections are $60 per barrel this year, and $70 next year.
Members of major oil-producing countries have managed to amicably arrive at a production cap that would negate the efforts of U.S.-based shale oil producers. It was a short-lived rally by the independent shale oil industry, but still gave the world a much-needed breathing space to deal with the economic malaise.
The Philippines had been blessed during the years when the developed world was reeling from the collapse of the global financial system; billions of dollars continued to be sent home by overseas Filipinos, either living or working abroad.
At the same time, the local business process outsourcing industry was sponging up a big chunk of the unemployed sector, offering good paying jobs that complemented well with the still respectably healthy overseas job opportunities for Filipinos.
It also helped that for more than a decade, the domestic political environment was conducive to the entry of foreign investments, however short-term they had been. Sound monetary policies also safeguarded fundamental economic gains.
Government remained credible as it strove to keep the bureaucracy running under much-reduced corruption levels and a more transparent administration of state affairs.
An honorable government, however, is not enough. While countries that mattered to us were struggling to make ends meet, we failed to prepare for their eventual recovery. The country’s two biggest assets – overseas remittances and BPO jobs – were also our weaknesses: we just relied too much on them.
There is a growing protectionism that is being embraced by many countries, including the U.S., that threatens both overseas jobs for migrant Filipinos and local employment for those in the BPO sector.
Regrettably, the country should have fortified itself by strengthening its agriculture sector and identifying new opportunities to create other reliable sources of economic growth such as tourism and well-chosen manufacturing industries.
More importantly, the groundwork for an infrastructure master plan should have been laid down and started, which would ensure that the country has the roads and bridges, ports, and utilities like power and telecommunications that would have paved the way for improved economic performance.
This explains why the Philippines is getting mixed forecasts. Finance conglomerate UBS said that the Philippine economy will be in for slower growth in 2017 and 2108, while the peso will weaken to P51 this year and P55 next year.
BMI Research, a unit of Fitch Rating, while still optimistic about the Philippines’ future, nonetheless gave only a 6 percent growth rate projection for the country in the next five years.
The economic fundamentals of the Philippines remain strong up until now, but it is not rock-solid as President Duterte’s economic team would want to believe. It has sailed well in the past because most competitors had been weakened.
Such gains, though, could be whittled away swiftly if nothing is done to significantly sustain the momentum accumulated over the past decade. This means coming up with an even better incentive package for investors to set up their businesses here.
New infrastructure projects
If there is one thing that we can look forward to in 2017, it is the opening up of new infrastructure projects that had been held back during by last administration. But completion of these will only happen down the road, and hopefully not too late for future investors to consider.
Similarly, new power projects and the shaping up of a more competitive industry will potentially bring down electricity costs, one of the biggest concerns of new investors in the country.
Telecommunication services will also most likely be better with the opening up of the 700-mhz frequencies that would give us true LTE speeds for Internet use. This should also improve the current rates, which again have been criticized as on the high side.
Will we lose our BPOs? Not this year, for sure. But the growth will be drastically lower as the Trump government weighs in on American companies to consider setting up call centers in the mainland, no matter how uncompetitive it may be to those here in the Philippines.
Will we see our agricultural sector resuscitated? Again, not this year – or even next year. This is just not on top of our economic managers’ consciousness as yet. The same is true for our tourism industry.
How about our OFWs? Filipinos at home who still heavily rely on remittances from their kin abroad will still be able to expect about the same level of financial assistance. And they should be happy that their dollar will be able to buy so much more in the coming years.
The U.S. is a giant that has been sleeping for so long. When it wakes up, it will be focusing all its attention to catching up on all the things it missed. The Philippines can speed up things to not fall behind; otherwise, it will just have to watch from the sidelines – again.
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