Our economy on edge


THE announcement yesterday that the country’s GDP grew by 6.3 percent in the fourth quarter came as a pleasant surprise, and could be considered generally good news. The consensus of most analysts before the data were released was that growth in the last quarter would be rather modest, about 5.8 percent; the actual results exceeded expectations, and thus, are a positive outcome.

Nevertheless, there are definite signs that our economy, while certainly not in bad shape, at least in the context in which national economies are compared with one another, is facing risks that are starting to have a negative impact. And in this sense, the government – both the one that we must still tolerate for another five months, and the one that will replace it – should be reminded that in the wake of the positive Q4 result, a strategy to deal with rapidly dimming economic prospects is far more important than a strategy to broadcast self-congratulations for having “one of the best economies in Asia.”

The first indicator that should cause some concern is the modest quarter-to-quarter increase in the growth rate from the third quarter of last year to the fourth quarter. In a typical year, the difference, thanks to holiday spending, is usually close to one percent, if not more (the Q3-to-Q4 acceleration was 1.1 percent in 2014). For 2015, however, the gain was a paltry 0.2 percent (6.3 percent versus 6.1 percent in the third quarter). That indicates muted economic activity.

Another factor that is somewhat alarming is the steady deceleration of the full-year GDP growth rate: From 7.2 percent in 2013, growth slipped to 6.1 percent in 2014, to just 5.8 percent for the full year 2015. The economy is still growing, but it is growing at a progressively slower rate – which, coincidentally, is exactly the same sort of problem that is being experienced by China’s economy, and which is obviously something that is regarded by the rest of the world as a serious economic problem.

To be clear, the Philippine economy does deserve much of its reputation as a good performer. But there are signs that have become apparent over an extended period of time that the economy is slowly losing its resilience. The time to act on that with effective spending, and measures to encourage capital investment and job creation is now, before the economy’s strengths are eroded.

At this point, we are not confident any of the aspirants for the presidency have properly considered this. The Aquino Administration certainly has not, otherwise the alarming trend shown by the macroeconomic data would not be happening in the first place. We cannot afford another six years of on-the-job training for the nation’s President and his or her Cabinet when it comes to the economy. Letting the current reasonably good condition of the economy decline further would be taking an even bigger step backward.


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  1. Compare this with China.
    6.9% growth this year – and they are very much displeased.
    The biggest contributor is services – 7.5%. Manufacturing has a modest 5.6% (again compared to China’s 12% which again they are also very much displeased).
    Bottom line – the drivers of our economy are the remittances of OFWs and BPOs. No way this can lead us to World Class. The driver to world class status is and will always be manufacturing or industrialization. This is what our next administration should focus on. Growth in manufacturing has to be supported by growth in infrastructure (roads, bridges, telecommunications, ports, airports), education and agriculture (growth is a miniscule 0.2%, which will result to more importation of foodstuffs instead of raw materials to fuel the manufacturing sector).

    Don’t get fooled by the campaign promises of Binay and Poe. It is welfare-oriented and will never help improve our economy. Same with Roxas, whose pitch for BPOs may reduce unemployment but will only marginally lift our economy. Only Duterte has industrialization in his platform.

  2. Mariano Patalinjug on

    Yonkers, New York
    28 Jan. 2016

    Even if the country’s economy should achieve a GDP growth of “just” 5.8% for the whole of 2015, that would still be quite impressive viewed in the context of China’s economy which is faltering and is having a negative impact worldwide.

    President Aquino and his economic “brain trust” must be assumed to be aware of what’s happening in terms of the behavior of the GDP and must know what measures need to be planned and taken this year to try to get the country to maintain its average annual GDP at close to 7%.

    This will require, of course, more spending by both the private and the public sectors. Those planned PPP projects should now be considered for implementation as soon as possible this year for the very purpose of giving the Economy the filip that it needs to keep the momentum going smoothly.

    It is opportune that the 38-km commuter train line from Tutuban, Manila to Malolos, Bulacan, is now ready to be implemented, with the P97-Billion price tag to be financed by the Japan International Cooperation Agency [JICA].


  3. Inputs, Outputs, & Outcomes

    The creator of the GDP Simon Kuznets in a 1934 report to the US Congress acknowledged the GDP’s flaws as an economic indicator, “The welfare of a nation can
    scarcely be inferred from a measure of national income. If the GDP is up, why is a country
    down? Distinctions must be kept in mind between quantity and quality of growth. Goals for more growth should specify more growth of what and for what.”

    GDP is a statistic that does not necessarily measure wealth creation or the quality of growth. It is a statistic that disasters, gambling, and useless endeavors can inflate.

    A more holistic view to put GDP into context.

    Pnoy Aquino has had the luxury of no constraints on INPUTS – young workforce, 3 trillion budget, rising Asian economic tide, 6 years, 1 million personnel/administration, compliant congress/senate, OFW remittances.

    It is those inputs which drive the PROCESSES, and which themselves have been plagued by incompetence and corruption, and which in turn generate the OUTPUTS, including GDP growth which has been the only flag to be saluted by Pnoy Aquino, but GDP, whilst important, is a means to an end, not the end in itself.

    Outputs should be considered as an interim factor which through POLICIES (lacklustre and outmoded), determine the end objectives, and the only things which really matter – OUTCOMES.

    And it is the outcomes which paint the true picture, and one which is neither pretty, nor instils confidence in the future.

    But most disconcerting of all is the continued dependence upon OFW’s and BPO’s, both of which could be prone to future changes ( foreign govt policies, disruptive technologies, etc), and no strategic vision to build up new skills/industries/value added services.
    Diversification, rejuvenation, market expansion, sectirusation etc.

    Corruption – worse – dropped 10 places to 95th in 2015 Transparency International world rankings.

    Poverty – worse – 45% rate themselves as poor (SWS), and 25% live below the poverty line, which is the highest rate in ASEAN, by far, and shameful.

    Unemployment – highest in ASEAN

    Inequality – far worse. The major economic issue, and resulted in no inclusive growth.

    OFW’s – increase by 40% since 2010.

    Education – philippine failed to meet UN Education for All targwts, and all PH universities gone down in world rankings.

    Investment – FDI well below targets and a sign of little confidence by international investors

    Millenium Development Goals –
    PH ailed to meet main targets

    Tax evasion/avoidance – no-one jailed. A major problem

    Extra judicial killings/Human Rights – has become worse and a bad international image

    Tourism – failed to meet targets

    Crime – becoming a narco state. And considered a hub for human/sex trafficking

    Traffic – horrendous and major cost to economy.

    Infrastructure – all below par (airports, riads, internet)

    And the only vision that LP can offer to the electorate is “more of the same”. Crazy.

    “Insanity is doing the same thing, over again, but expecting different results”
    Albert Einstein

    The current crop of incompetents in Malacanan may be unconcerned and unfazed by anything and everything, as they continue to ignore reality, but the next administration will soon get a wake up call.
    Pnoy Aquino was handed strong economic fundamentals by his predecessor, but he will be handing over a can of worms.

    There will be a significant downturn end 2017/beginning 2018.

  4. So, what do you want to do? You can’t only talk. It is impolite to be a critic if you can’t make any change.