Year of the Dragon

This coming Jan. 23, a national holiday because of the Chinese New Year, Filipinos have really something to celebrate during the incoming Year of the Dragon. Our economy will be among the emerging markets like China, India and Indonesia that will post a respectable GDP growth rate of more than 5 percent, thanks to our large domestic market. Many of our neighbors, like Thailand, Singapore, Taiwan and Hong Kong will not be as lucky. They are too export-oriented.

In fact, I expect at least a 6 percent growth of GDP for the Philippine economy for the whole of 2012. Thanks to our not being too export dependent, we are partly insulated from the stagnation that the world economy will experience in 2012.  Exports account for a little over 30 percent of our GDP, in contrast to close to 200 percent in such tiger economies as Singapore and Hong Kong.  These rich countries will see their GDP suffering from either a decline or a significant slowdown.  Not the Philippines or Indonesia, or China, or India. They can thank their large populations which guarantee a large domestic market for their local businesses.

Although I do not accept at face value the prediction by some population commission officials that the Philippine population will reach 97 million by the end of 2012 (it will be closer to 95 million), I welcome talk of a large population. A large population attracts investors, both domestic and foreign, because of the strong domestic market they see. Even the lowest-income households (the so-called D and E markets) can offer attractive markets for the savvy businessman who knows how to mine the “bottom of the pyramid.”  Ask Procter and Gamble, Unilever, Jollibee, McDonald’s, Alaska Milk Corp., Lucky Me, Nestlé, etc. They are creative enough to design products that can be sold to the poorest of the poor.

Because of expert management by people in our Bangko Sentral, our inflation rate will be controlled at 3 to 4 percent. Foreign reserves will be reaching an all-time high of $80 billion before the year is over, preventing any significant depreciation of the peso in a very volatile global environment. The lower rate of inflation, decreased commodity prices, and abundant liquidity in the financial sector will benefit the investment community, especially in such sectors as infrastructure, real estate, construction, BPO and KPO, mining, energy, agribusiness, tourism, logistics, transport, telecom, education and health care. Both investment and consumption will be engines of growth of the economy for the Year of the Black Water Dragon.

A very good news that ushered the New Year was the announcement by the Department of Budget and Management that P141.8 billion worth of infrastructure projects will be used to pump-prime the economy, after a year of “paralysis by analysis.” This amount, which will be released during this first month of the year, is part of a P182.2-billion total budget for government infrastructure, that will include the construction and upgrade of roads, bridges, airports, seaports, classrooms, water supply systems, irrigation facilities and flood control projects. These expenditures will have significant multiplier effects, especially in regions outside Metro Manila.  Together with the more than $20 billion of OFW remittances, these capital expenditures will ensure that the more than 6 percent GDP growth I expect will be fueled by both consumption and investment.

What about “inclusive growth”? Will the growth lead to alleviating mass poverty? I am optimistic because I see the efforts of Vice President Jejomar Binay complementing the excellent work of the economic team in controlling inflation and mobilizing funds for investments with pro-poor projects. I see the Vice President trying to replicate at the national level what he did when he was mayor of Makati in ensuring that growth in one of the richest cities in the country would trickle down to the poor in terms of quality education in the public schools, health care, housing and welfare for the senior citizens. It was a very wise move on the part of President Aquino to assign the Vice President to two of the most effective channels to uplift the conditions of the masses: social housing and OFW welfare.

Another source of optimism is the work I see being done at the Department of Public Works and Highways whose leadership is addressing the decades-old problem of inadequate rural and agricultural infrastructures. Next to providing their children with access to quality public education, the greatest service we can give to the poor, who are mostly in the rural areas, is to endow them with the infrastructure they need to make their small farms productive and to bring their produce to the markets cost-effectively.

We may not achieve our targets for the Millennium Development Goals by 2015, but we are headed in the right direction. We are applying emergency measures to alleviate the economic sufferings of the poorest of the poor through the conditional cash transfer program. But even more important for the medium-term reduction of poverty, we are creating the right environment for both public and private investments in the countryside, the only sustainable way of creating employment opportunities and thereby reducing mass poverty.

Dr. Bernardo M. Villegas is senior vice president of the University of Asia and the Pacific. His e-mail address is bernardo.villegas@uap.asia