A stable growth in 2018

This year promises to be quite a successful one. Much of the world is in turmoil  or at risk but it’s in areas that have little impact on us such as in the Middle East, Africa and North Korea. Elsewhere, the world is doing well: stock markets are up, investment is happening, people are buying so GDPs are up, even in Trumpland.

Philippine imports are consequently growing nearly 10 percent at current dollar exchange rates, and another 10 percent growth is expected this year. Exports have grown at 12 percent and we expect to grow at a respectable 10 percent this year.

The BPO industry is slowing down due to hesitation from some new investors and maturing of the voice service segment, but growth of close to 10 percent is still expected. On the other hand, OFW remittances, the other prong of this stable pair, will likely reach $35 billion this year on a growth of 5 percent.

Sad though in human terms, the destruction of Marawi City will provide about a P90-billion boost in government spending over the next four to five years. Allocation for this year’s rebuilding program is part of the 20-percent growth in government spending on infrastructure, which will result in some P1.1 trillion spent. Public-private partnership and Official Development Assistance projects will add to this.

I’m not happy with the single number forecasts for GDP growth. It is uncertain how well they track people’s well-being anyway. The Wallace Business Forum sees GDP growth somewhere around a comfortable 7 percent this year, up slightly from last year.

The interesting thing is we can see little that could put this forecast at much risk. A nuclear war from North Korea perhaps? This is bordering on the unthinkable, however. Domestically, President Duterte has shown that despite (or because of?) his radical leadership style, the economy can grow.

I find the “trickle down” concept to be passive and anemic. A much more positive and direct approach is needed. I like Trade and Industry Secretary Ramon Lopez’s approach of getting actively involved in helping MSME’s to start and to grow.

I’d also like to see a much more radical approach given to agriculture, the lifeblood of society. The Philippines is well positioned to become a leader in low-cost, high-quality produce but the reverse has been happening. As I have long argued, the total approach to land reform is wrong and the excessive focus on rice is equally wrong. You need plantations for a variety of crops. You don’t need rice self-sufficiency, you just need enough sufficiency no matter what happens and regardless of where it comes from.

Mining must also be revived. It could contribute at least 3 percent to the economy from barely 1 percent today, and 15 percent in export earnings from the current 5 percent. It should be done where it matters—the countryside. The ban on open-pit mining has to go. Our principal minerals, copper and nickel, can only be mined through open-pit mining.

Manufacturing has been a revelation. It grew faster than the economy during the past five years. This shows that the country can capably revive industries with a well-thought-out industrialization plan that focuses on the country’s strengths and addresses logistical, labor, technological, financing and other issues. Together with construction, manufacturing has enabled the industrial sector to again set the pace for growth in four of the past five years.

The bright outlook in world trade, with the Philippines expected to continue to outperform the rest of the world, should support manufacturing in 2018.

The central bank, aware that inflation would be less of a threat and well within its target range, will continue to generously pump funds into the system, hence allowing corporations and the government enough borrowing leeway to make the economy grow strongly. This policy stance means interest rates will remain reasonably low and stable. But the maintenance of low interest rates will induce the exchange rate to depreciate further as global funds go to other countries with higher yields.

In summary, the Philippines is in a good position to maintain its status as among the fastest-growing economies in Asia this year, most likely even slightly surpassing last year’s results. It has sufficient leeway to mobilize resources both domestically and globally to make this growth forecast happen.