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Will our momentum hold?

/ 05:22 AM January 26, 2018

The end-of-year economic growth numbers are out, and while the growth rates are slightly slower than last year’s, Socioeconomic Planning Secretary Ernie Pernia was quick to point out a feat that recent administrations could not pull off: It has managed to avoid the “postelection year curse” of a drastic economic slowdown in the year following an election year. It’s indeed a welcome departure from our past record, as our economy has had great difficulty getting out of boom-and-bust cycles for decades, seemingly never able to sustain a growth momentum.

In 2005, following Gloria Macapagal Arroyo’s controversial win in the presidential election the year before, the economy ground down to a modest 4.8 percent annual growth, after having expanded nearly 8 percent in the first half of 2004. Largely to blame was the political turmoil arising from questions on her legitimacy as president, compounded by a sharp rise in fuel prices then. With business confidence severely undermined, investment spending shrank, worsened by a drastic weakening in global demand for electronics, the Philippines’ dominant export product.

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The slowdown was even steeper the year after Benigno Aquino III won the presidency in 2010. After spectacular growth of nearly 9 percent early in that election year, the economy fizzled down to a mere 3.7 percent in 2011. The government was widely faulted for having inflicted the slowdown on the economy, with public spending seeing severe contraction when it put on hold or canceled various infrastructure projects in the supposed drive to weed out graft. That slowdown led the Aquino administration into embarking on the now infamous Disbursement Acceleration Program, as a drastic action in the attempt to reverse the situation. And the rest is history.

But no such drastic slowdown has occurred in the year after Rodrigo Duterte was swept into the presidency. Defying past experience, growth in our gross domestic product has stayed steadily in the 6-7-percent range, starting back in 2012 after the last postelection year dip, and now sustained well after the 2016 election. I’ve heard friends express surprise that the economic momentum remains unperturbed by the “political noise” that has come at more than the usual rate under Mr. Duterte’s rule. It’s as if there has been an effective “firewall” between the economy and the political arena, insulating the economy from the disturbances that such noise would normally inflict on economic stability.

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Perhaps it’s because hardly anyone in the economic sector doubts the stability of Mr. Duterte’s hold on power, strongman ruler that he is, quite unlike the seemingly tenuous hold that Arroyo had in the tumultuous aftermath of her questioned election. Or perhaps the strong economic fundamentals left by his predecessors has led to the resilience that the economy now manifests. Perhaps the general confidence people have in Mr. Duterte’s economic team has translated to corresponding confidence in the outlook for the economy, political noise notwithstanding. It’s probably all of the above. In any case, our sustained economic growth is good news for every Filipino, as it now allows us to pursue higher-level goals like making the growth more inclusive and environment-friendly, and ramping up growth further onto a yet higher plane.

What could threaten the current economic momentum? As the success of Mr. Duterte’s “build, build, build” thrust is critical to our economy’s strength, the risk of our infrastructure agencies’ traditional implementation weaknesses getting in the way of its effective pursuit is one. Loss in momentum in completing the government’s five-phase tax reform program, given the approaching midterm elections, also imperils our growth trajectory. Fiscal pressures owing to a massive hike in public investments, and populist but expensive policies like free college tuition and irrigation, could threaten macroeconomic stability. Nonpassage of the Bangsamoro Basic Law and lack of lasting peace in Mindanao could bring us more Marawis, possibly of graver consequences.

Alas, all these lie largely in the hands of our leaders in the government. One can only pray that their minds and hearts are in the right place.

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TAGS: economic growth, Economic Slowdown, Ernie Pernia, growth rates
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