Trailing our neighbors
Those in my generation have lived long enough to witness how our economy slid down from being top in Southeast Asia up to around 1970, to being now the worst among our Asean-6 peers (i.e., Indonesia, Malaysia, Singapore, Thailand, and Vietnam). Over the years, we slipped further and further behind, and the disturbing reality is that on certain measures, the worsening trend persists to this date. Let’s examine some of the numbers on key economic indicators and measures that illustrate this.
An easy place to get the numbers is the Bangko Sentral ng Pilipinas website, where the “Statistics” tab brings you to a comprehensive set of economic data, including a table “Economic Indicators of Selected Countries.” Here one finds data on the Asean-6 (plus a few others). Below are some facts and comparative data with our closest neighbors. I examine my usual PiTiK indicators of presyo, trabaho, kita (prices, jobs, and incomes respectively), along with exports and foreign direct investments.
First, Philippine prices are rising the fastest. Our 5.8 percent average inflation rate in the second quarter outpaced Singapore’s 4.1, Indonesia’s 3.2, Vietnam’s 2.5, Malaysia’s 1.8, and Thailand’s 0.6 percent. Clearly, there are more than hiked global prices driving our inflation, as that wouldn’t explain why our inflation rate is significantly faster than in our neighbors. It’s well known that food prices have mainly been driving Philippine inflation, and this traces to our government’s traditional mismanagement of our agriculture and food sector over the long term, and its refusal to loosen obvious market tightness via eased food imports in the short term. As I wrote last week, government is doing all the wrong things at the worst time.
Second, we persistently have the highest unemployment rate (currently at 4.8 percent), except for Indonesia at this time (5.5 percent). While it’s good news that our unemployment rate has returned to pre-pandemic levels, it remains significantly higher than Malaysia’s 3.5, Vietnam’s 2.3, Singapore’s 1.6, and Thailand’s 1.0 percent. This is even with millions of our workers employed abroad, which means that joblessness would have been far worse if not for those overseas jobs. And what it does to the families of those who must leave to support them is a cost that they would rather avoid if they had a choice.
Third, our economy posted the second fastest growth among our peers. Even with a Q2 slowdown to 4.3 percent, it still outpaced Vietnam’s 4.1, Malaysia’s 3.2, Thailand’s 1.8, and Singapore’s 0.5 percent (although eclipsed by Indonesia’s 5.2 percent). But this is mostly an arithmetic outcome rather than a strong showing because our economy sank the deepest during the pandemic. Our higher growth rate is simply the natural result of recovering from an unusually deeper contraction.
Fourth, we continue to get the least foreign direct investments (FDI) among our peer neighbors. The $9.4 billion that came in last year was below Thailand’s $10.2 billion, Malaysia’s $15 billion, Vietnam’s $17.9 billion, Indonesia’s $21.4 billion, and Singapore’s $140.8 billion. Worse, our FDI inflows have dropped by a fifth so far this year, even as some of our neighbors saw theirs increase. It’s this inability to draw in more job-creating FDI that pushes too many Filipinos to seek their fortunes abroad.
Fifth, we export far less than our neighbors do. This relates directly to our difficulty in attracting FDI, as the dynamic exports of our neighbors largely come out of the same foreign companies we find hard to attract. Even worse, the export gap with our neighbors keeps on growing over time. Last year, our $79 billion merchandise earnings were a pittance compared to Thailand’s $287 billion, Indonesia’s $292 billion, Malaysia’s $353 billion, Vietnam’s $372 billion, and Singapore’s $515 billion. The gap with next-higher Thailand is already $208 billion; in 2021, the gap with then next-higher Indonesia was a much smaller $157 billion. Our export lag also mirrors our pathetic performance in agricultural exports, from which we earned only $7.5 billion in 2022, a tiny one-seventh of Vietnam’s $53.2 billion, about a fifth of Thailand’s $37 billion, and less than a third of Malaysia’s $25.7 billion. We also have the lowest exports-to-GDP ratio of 13.8 percent, vs. Indonesia’s 19.6 percent, Thailand’s 53.5 percent, Malaysia’s 63.3 percent, Vietnam’s 104.2 percent, and Singapore’s 126.9 percent.
We have slid so far behind, that it’s hard to imagine how we could ever catch up. Something is fundamentally wrong in our country, and our successor generation of workers will be severely handicapped by our current twin crises on education and early child malnutrition and stunting. Unless we act with extreme urgency now, prospects that our next generation will be equipped to turn our country around look discouraging indeed.