Reason to be bullish

Filipinos have reason to face the new year bursting with hope. That is, insofar as the economy is concerned. From all indications, Asia’s best performer in 2012 is headed for another banner year.

Christine Lagarde, the first female managing director of the International Monetary Fund, boosted this upbeat mood during her visit to Manila last December: “The Philippines is probably the only country in which we have increased the growth forecast as opposed to other places in the world where we actually decreased our forecast.”  This, coming from the head of a multilateral agency criticized by many developing countries for prescribing austerity measures and pushing many nations to open up their economies to globalization. The IMF, in its October 2012 World Economic Outlook, raised its 2012 growth forecast for the Philippines to 4.8 percent from 4.2 percent in April. (The growth projection for this year was upgraded to 4.8 percent from 4.7 percent.)

Lagarde also provided a more optimistic view on the Philippine economy: “I know that the growth in 2012 will be way in excess of 5 percent and we’re certainly looking forward to 2013 to be in the range of 5 percent as well. This is due in no little parts to the excellent policy mix deployed both by the secretary of finance and the central bank of the Philippines.”

Such economic exuberance was likewise manifested in the Philippines’ ranking second among 58 countries in the Global Consumer Confidence Survey conducted by The Nielsen Co., a two-point jump in the third quarter of 2012 from the second quarter. With a score of 118, the Philippines was next only to India and Indonesia, which both shared the top spot with 119. The survey noted that a score of 101 and higher indicated more optimism, while a score of 100 and lower meant more pessimism. Among Southeast Asian countries, consumer confidence in the Philippines bested Thailand by 6 points and Malaysia by 13 points. Singapore and Vietnam scored below the index of 100 with 98 and 87, respectively.

As 2012 drew to a close, credit-rating agency Standard and Poor’s raised its outlook for the Philippine economy from “stable” to “positive,” which means that the country can expect, barring any unforeseen circumstances, an actual credit-rating upgrade in the coming months.

In explaining the move, S&P praised the Aquino administration for its “improved capacity to effect reform,” which stems from “a level of legitimacy, support and stability that reduced political uncertainty and allows for improved legislative efficiency.” The improved outlook followed the signing of the landmark bill reforming sin taxes that further strengthened the government’s fiscal position. Some P34 billion in incremental revenues are expected to be collected from tobacco and alcohol this year due to the excise tax reform bill signed into law by President Aquino last Dec. 20.

Local and foreign economists and analysts are agreed that the Philippines enters 2013 with much optimism. Consider this view by Edward Teather, senior regional analyst of the Swiss banking group UBS: “Our outlook is still positive for the Philippines. We see overall investments to pick up, positive credit growth, exports, current account surplus, fiscal impulse on the positive or aggressive side, and we view positively the government reform efforts such as the fight against corruption, addressing the sin tax issue, improving peace conditions in southern Philippines, and stronger infrastructure spending.”

However, there will be challenges along the way. On top of the list is the administration’s anticorruption effort. Despite the publicity promoting President Aquino’s “matuwid na daan” campaign, the Philippines still ranked 105th out of 176 countries in the recent Corruption Perception Index of Transparency International.

Lack of infrastructure is another area of concern among businessmen and economists, although the government has promised to speed up the approval and implementation of projects under the flagship Public-Private Partnership (PPP) program.

In the longer run, making the benefits of growth trickle down to the masses should be the main direction. This did not escape IMF’s Lagarde when she urged the government to carry on its efforts toward an inclusive, sustainable growth: “We share the government’s view that growth should benefit the broader section of population. Inclusive growth is more sustainable and it is really to the credit of this government to make sure that growth is as inclusive as possible and inequalities can be reduced.”

Indeed, for the first time in many years, Filipinos have a real reason to be bullish.