THE real story behind the Philippine growth narrative lies not in the numbers of gross domestic product (GDP) growth or widening trade deficits that many Filipinos actually don’t grasp, even the educated ones, especially when gauged against their actual financial condition and what’s left of their monthly income before the next pay day arrives.
As the US-basedAtlantic magazine noted ages ago when the Philippines supposedly emerged from being “The Sick Man of Asia” and into the limelight as the world’s latest economic darling—after credit rating agency Fitch Ratings lifted the country from junk in terms of sovereign creditworthiness to investment grade for the first time ever—the grim reality behind such accolade was the fact that only an elitist few were actually benefiting from the economy.
As we know by now, the latest government figures heralded the GDP as having grown by 6.8 percent last year, the fastest since 2013 – the year Fitch gave the Philippines its vote of confidence.
On Friday, the Bangko Sentral ng Pilipinas (BSP) added more mystifying numbers to the raft of economic and monetary data. “For the 14th consecutive year, the current account recorded a surplus. The $601 million surplus in 2016 (representing 0.2 percent of GDP), however, was 91.7 percent lower than the $7.3 billion (2.5 percent of GDP) surplus in 2015. The decline in the current account surplus was due primarily to the widening deficit in the trade-in-goods account.”
What the central bank is saying is that the current account, or the difference between a country’s savings and its investment, shrank by 91.7 percent to around $601,000,000 last year, from around $7,300,000,000 in 2015. It also pointed at the trade balance (exports minus imports) that registered a huge merchandise trade deficit, the reason why the country ended up with only around 8.3 percent of the money in its current account in 2016 than what it had a year earlier.
Any economist would explain the current account shortfall by noting that it follows the cyclical trend of the economy since the trade balance is actually the biggest factor in determining the current account balance. When the economy is expanding at a stronger pace, imports grow in tandem.
The Philippines registered a merchandise trade deficit of $34.1 billion last year, or 46.2 percent wider than the $23.3 billion in 2015, according to BSP data. Obviously, exports weren’t able to catch up and were almost stagnant at $43.4 billion, from $43.2 billion, up by 0.6 percent. At the same time, imports of goods surged 16.6 percent to $77.5 billion, from $66.5 billion.
What this means is that buyers of Philippine products ordered less manufactured goods and mineral products, while the country bought more capital goods and raw materials and intermediate goods used for making a final product.
What is really interesting to note in the central bank trade numbers are those that pertain to services, or non-merchandise trade, which grew by 30.6 percent to $7.1 billion, from $5.5 billion. Then there are the export earnings in business process outsourcing (BPO) services totaling $20.2 billion, up 12.8 percent from $17.9 billion.
A separate BSP report showed that remittances from overseas Filipinos totaled $29.706 billion, up 4.9 percent from $28.308 billion.
Now, those numbers are the real deal for the majority of Filipinos who can easily relate their financial condition to the amount of monthly remittances their respective households receive from a relative abroad, or from the share a call center or BPO worker contributes to the monthly household budget.
The Philippine economy is unique in that it thrives on labor export as the country does not have a well-developed industrial sector with big-ticket items for the export market like South Korea and its cars and electronics and electrical machineries.
The reality is that’s what we are as a people and a nation, nothing to brag about after 119 years of independence since 1898, but definitely something to be proud of as the country moves along in these interesting times of socio-political and economic changes.