Monday, October 22, 2018
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No Free Lunch

We’re still ‘kulelat’

There is much to be pleased about with our economy in the past seven years. Apart from the most recent price movements, we’ve had the slowest price increases since the 1990s. Our economy has been among the fastest-growing in Asia and the world, with GDP growing annually at 6-7 percent. Our exports have substantially grown over the last decade, earning $69 billion in 2017, from only $41 billion in 2005. And after averaging a measly $1 billion in foreign direct investment inflows a year in the first decade of the 2000s, last year we attracted more than 10 times as much.

There is also evidence that our economy’s growth has become more broad-based, and its benefits more inclusive. Whereas private consumption spending had dominantly driven the economy’s growth in the past, investment spending, which has grown consistently at double-digit annual rates since 2010, now contributes much more to GDP growth.

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On the production side, industry, dominated by manufacturing, has become the fastest-growing sector, outpacing agriculture, fishery and forestry, and our traditional growth driver, services. These have pushed unemployment and underemployment to historical lows (now averaging 5-6 percent and 16-17 percent, respectively), even as the exodus of Filipino workers overseas has slowed.

Poverty incidence has gone down to one in every six families (16.5 percent) as of 2015, from one in five (19.7 percent) in 2012. Many more indicators point to a much stronger economy than we’ve had in past decades.

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OPINION

All that is good news, but we can’t exactly pat ourselves on the back yet. The sobering reality is that, even after all these, we still haven’t done quite well enough to catch up with our comparable Asean neighbors. In past decades, our neighbors, especially those among the original five members of the Asean (Asean 5), had left us behind to be the kulelat (bottom-dweller) in most key economic performance indicators.

The sad fact is that, today, we remain very much the kulelat; in some indicators, we now lag even farther behind. Let’s look at a few indicators to see what I mean.

Up until about 10 years ago, Indonesia had a lower average income (GDP per capita) than we did, making it last, and us fourth, among the Asean 5 in average income. Last year, Indonesia was already 12 ranks (113th) ahead of us in the World Bank listing of 184 countries, with a nominal GDP per capita of $3,847, while we ranked 125th with $2,989.

In 2005, we had the lowest export earnings among the Asean 5 with $41 billion, trailing Indonesia, which earned $86 billion (Thailand had $110 billion, Malaysia $141 billion, and tiny Singapore, $230 billion). We still did better than Vietnam’s $32 billion then. Last year, 12 years later, our $69 billion from exports trailed behind Indonesia’s $169 billion, with the gap having more than doubled to $100 billion from just $45 billion in 2005.

Vietnam had already overtaken Indonesia with $214 billion in exports, having grown its exports nearly seven times in the last 12 years. Our total trade was deep in deficit last year, with imports exceeding exports by $27.4 billion. But the rest of the Asean 5 saw trade surpluses, from Indonesia’s $11.8 billion to Singapore’s $45.5 billion.

We had $10.1 billion in net foreign direct investments last year, slightly edging Thailand and Malaysia’s $9.1 billion each—but well behind Vietnam’s $14.1 billion, Indonesia’s $22.1 billion, and Singapore’s $63.6 billion.

We had the worst annual inflation (4.8 percent) as of the second quarter this year, as our neighbors ranged from Singapore’s 0.2 percent to Vietnam’s 3.8 percent. We also had the highest joblessness last year at 5.7 percent, versus Thailand’s 1.2 percent, Singapore and Vietnam’s 2.2 percent, Malaysia’s 3.4 percent, and Indonesia’s 5.6 percent.

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And while our neighbors (except Indonesia) saw their currencies go up from a year ago, our currency dropped about 8 percent—telling us we must be doing something differently, and wrongly.

All told, we have not gained any ground relative to our neighbors. In some ways, we’re even more kulelat than ever. Yes, we seem to have achieved so much—but, alas, it’s still far from enough.

cielito.habito@gmail.com

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TAGS: GDP growth, Philippine economy, poverty incidence
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