THE GOOD news is that the economy grew faster than expected in the second quarter, surprising many market watchers, several of whom wonder whether the Philippines will continue to be the international investors’ darling that it was under the previous administration.
Another piece of good news is that the country benefited immensely from the massive spending during the March-May election campaign. Yet another positive development is that the economy continues to enjoy the cash surplus that has flooded the world in the last few years, and there is little evidence that this liquidity will dry up anytime soon. That’s because the advanced economies whence this liquidity comes—the United States, Europe and Japan—continue to struggle with weak growth, and flooding their financial systems with cash (a portion of which finds its way to other attractive investment destinations like the Philippines) is their governments’ way of trying to jump-start growth.
In short, the new administration has everything going for it when it comes to the economic front.
And what of the proverbial bad news? Nothing, really, at this point, except that the weight of public expectation has now been transferred to the shoulders of President Duterte and his economic managers.
The truth is that the economy now has two engines (dollar remittances from expatriate Filipinos, and the earnings of the booming business process outsourcing industry) that will keep it running at a healthy clip even during difficult times.
Thus, keeping it growing will be child’s play. But making it grow at a pace that will lift more people out of poverty—by consensus, a sustained growth rate of 7-8 percent annually—is the real challenge. Achieving this will be the true metric of success.
The plans we hear from the President’s economic managers are bold and ambitious. We hear of plans to build a new international aviation gateway to decongest the old Ninoy Aquino International Airport; plans to build a new subway system for Metro Manila; plans to build a railway system that will loop around underdeveloped and resource-rich Mindanao. We hear of a national broadband system that will help improve internet services across the archipelago, and of a renewed focus on agriculture and manufacturing, where the bulk of Filipinos work.
All these, and more, are excellent plans. But the Aquino administration also had excellent infrastructure plans aplenty, some even more grandiose than the ones being proposed now.
What we need to see from the Duterte administration is the political will to get the economy growing sustainably at a rate that will cut poverty significantly in the way that it promised during the campaign. We need to see some of the President’s steely resolve in his anticrime campaign duplicated in the business and economic sphere, to create more meaningful jobs for the needy.
We need to see growth facilitated by accelerated fiscal spending to make up for the miserly ways of the past six years (without blowing the budget, of course). And we need to see the removal of roadblocks that prevent the private sector from fixing the creaking infrastructure in fast and efficient ways that only this profit-minded sector can muster.
The Aquino administration helped make the economy grow at a rate not seen before, but the quality of that growth was wanting and skewed heavily from those who most needed to feel its benefits. In a way, this proved to be its undoing, as ordinary citizens bowed under the weight of relatively mundane but productivity-sapping issues such as heavy vehicular traffic or daily commuter train breakdowns. But it cannot be denied that the current administration now stands on the firmer economic foundation that its predecessor brought about.
And perhaps more importantly, the Philippines has been granted another round of good luck by the invisible hand of the global economic system in the form of low borrowing costs and ample liquidity that are expected to continue over the medium term.
In short, President Duterte and his team will have a unique opportunity to deliver on its economic promises, having, for the most part, the same favorable circumstances that their predecessors enjoyed, but for some reason failed to maximize.
Economically speaking, this is a good time. But it will not last forever. At some point the winds will shift.
Let’s not waste it.