Expert sees slow growth ahead

The Philippine economy may have overshot its largest companies


WE all know the Philippine economy is one of the strongest in Southeast Asia over the past few years. Some even say it is the fastest-growing major economy in the entire Asian region with nothing but good times ahead.

At least, that is what we all believe.

But a recent paper written by a young researcher indicates the Philippine economy is due for a period of slower growth and may have already been decelerating, along with much of the rest of the world.

Christopher Mills analyzed the performance of seven of the country’s largest conglomerates and compared them to the overall economy. The data he used was the publicly audited financial statements of Aboitiz Group, Alliance Global Group, Ayala Corp., DMCI Holdings, JG Summit Holdings, San Miguel Corp. and SM Investments.
He initially showed that the averaged revenues of the seven conglomerates are very highly correlated to the overall Philippine economy. In mathematical terms, they had a correlation coefficient above 0.95 (where 1 is perfect correlation). This makes complete sense since the nation is dominated by these organizations and their success is critical to the economic success of the Filipino nation and vice-versa.

When the researcher next analyzed growth rates over the past few years, he found a striking divergence. While the general economy showed a trend of increasing growth rates, the audited statements of its seven large conglomerates showed decreasing trend lines. Clearly the two cannot diverge for long based on mathematical analysis and commonsense.

Mills also studied profitability measures for the seven conglomerates and found similarly disturbing trends. Both Return-on-Assets and Return-on-Equity have been in clear decline over the same period.

Given the large spending by political candidates leading up to the recent elections, the results make no sense. This spending should have powered up an already strong economy and the financial results of the large conglomerates.

The researcher’s analysis can only indicate the Philippine economy is headed for slower growth ahead. Now that the election spending is finished, this reality could become more apparent in the coming months.

Ideally, the new President will not have to make revisions on past economic growth numbers but, if that is the case, that bullet should be bitten as soon as possible. We also hope he will be gentle on the past administration that is handing over a nation in the best condition it has ever been in history.

[The Manila Times will publish the entire paper by Christopher Mills in the coming issues].


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  1. Pareng Asiong on

    None of those seven conglomerates really contributed much to the Philippine economy’s current growth trajectory. They were around back when the Philippines were the “Sick man of Asia.” Yes, they are all huge and contributed to the economy but the they were never really able to transform it from being the “Sick man of Asia” to what it is today. Yes, they do contribute to the GDP and do employ people, but how much did these seven actually contribute to the GROWTH of the GDP and the CREATING of more jobs?

    For too long, the Philippine economy managed to hobble along on one leg: remittances from overseas Filipinos. Then came the BPO boom. Today, the Philippine economy is able to stand on two “legs:” remittances and business process outsourcing.

    These are all good. But not good enough to be a Tiger economy. Tigers have four legs and plenty of sharp, strong teeth. No monopolies, no cronies, no uncompetitive oligarchies, no complacent conglomerates.

    Relying on those seven conglomerates’ performances would not have transformed the Philippines from “Sick Man of Asia” to one of the fastest growing economies in Asia.

    Unless those conglomerates can shape up and do something to vastly improve Philippine infrastructure (reliable, round-the-clock electrical generation, distribution and supply; effective mass rail transport; 24/7 potable water supply; efficient waste water and storm water drainage and treatment; faster internet; etc) they still won’t really be crucial factors in contributing to further growth nor will they be the agents in transforming the Philippines into a Tiger economy.

    They’ll be, as usual, just “there.”

  2. Mark Torres on

    1. The seven conglomerates were the only ones that benefitted from the Pnoy administration. The people never!
    2. These seven enjoyed free money from the government through bonds float etc while other businesses struggled hard for their capital.
    3. Expenses made during the election went to the tri-media companies and were not circulated well in the economy.
    4. Because government money or help went to these 7 conglomerates, you see building spree of condos that are empty, buying spree of small businesses and banks, import spree of anything.
    5. Pnoy government forgot the people. Pnoy government only took care of these seven.