Jthere were a number of important economic events that happened in the past week, I will discuss four of them here.
PFMJ’S FIRST SONA
Last Monday, July 25, President Ferdinand Marcos, Jr. (PFMJ) delivered his first State of the Nation Address (SONA). It was a 3S speech – sane, statesman, sensible – from a head of state. No insults, no threats of the type “I will expropriate your business” that we heard in the SONAs of the previous administration.
Instead, the opening statements were all about the economy: “sound fiscal management…reforms in tax administration…efficient spending…investments that improve productivity…supported ecozones…tax system adapted to the digital economy… an ease of payment of taxes.
“GDP growth targets 6.5-7.5% in 2022, 6.5-8% in 2023-28…9% or a single-digit poverty rate by 2028. A deficit-to-GDP ratio of 3 % by 2028. A debt-to-GDP ratio below 60% by 2025. At least $4,256 in income (GNI) per capita and attainment of upper-middle income status by 2024…the goals of this Medium Term Budget Framework (MTFF) submitted to Congress.
To me, that says one thing: economics, not politics and populist complacency, is paramount in the spirit of PFMJ. This implies that if these economic objectives contradict populist politics and lobbying, the former will prevail over the latter. Good start, Mr. President.
POST-SONA ECONOMIC BRIEFING
The next day, July 26, there was a big event, the Post-SONA Economic Briefing at the Philippine International Convention Center (PICC). I was invited and attended. There were three roundtables: economic, infrastructural and social sectors, and these provided more detail that was not elaborated in the SONA.
In a panel of the Economics Team, the five leaders came and spoke – Finance Secretary Benjamin Diokno, NEDA (National Authority for Economy and Development) Secretary Arsenio Balisacan, Secretary of Commerce and Industry Alfredo Pascual, Secretary of Budget and Management Amenah Pangandaman, Governor of the Central Bank Felipe Medalla.
In a panel hosted by the infrastructure team, speakers included Public Works and Highways Secretary Manuel Bonoan, Information and Communication Technology Secretary Ivan John Uy, Tourism Secretary Ma. Esperanza Christina Garcia Frasco, Energy Secretary Raphael Lotilla (by phone), and Energy Director Mario Marasigan, as well as Transportation Undersecretary Cesar Bermejo Chavez and Agriculture Assistant Secretary Arnel de Mesa.
And on the social or human development team, the speakers were Vice President and Secretary of Education Sara Duterte, Secretary of Social Welfare and Development Erwin Tulfo, Secretary of Labor Bienvenido Laguesma, Secretary of Environment and Natural Resources Maria Antonia Yulo Loyzaga, Migrant Workers Secretary Susan Ople, and Health Officer Maria Rosario Vergeire. The program hosts and panel moderators were the Undersecretary of State for Budget and Management, Margaux Salcedo, and the Director General of the Central Bank, Antonio Joselito Lambino II.
A total of 12 secretaries, including Vice President Sara and the Governor of the Central Bank, took the floor. Plus the under-secretaries of certain departments. It was a huge event and many business leaders, other government officials and virtually every media network were there.
In a presentation for the economics team, Finance Secretary Diokno showed the Philippines’ GDP growth trend from 2015 to 2021 and projections to 2028, and net foreign direct investment (FDI) inflows from 2015 to 2021, extended to Jan-April 2022. is an upward trend – good.
To better situate the growth trends of the Philippines, I have created this table spanning the period from 2005 to 2021 and covering five other major ASEAN countries. The data comes from the World Economic Outlook (WEO) of the International Monetary Fund (IMF) and the World Investment Report (WIR) 2022 of the United Nations Conference on Trade and Development (UNCTAD).
Before the pandemic – 2015-2019 – the Philippines was the second fastest growing economy in ASEAN-6 after Vietnam. And when it comes to FDI (foreign direct investment) inflows, the Philippines had the lowest in ASEAN-6 in 2005-2009, but in 2015-2019 the Philippines had caught up with Malaysia and Thailand (Table 1).
These are good trends – except for the sharp contraction in 2020, -9.6%, due to the severe and deadly business lockdown imposed by the previous administration.
Budget and Management Secretary Pangandaman made a good distinction and division of labor between national and local governments. Major infrastructure projects by national government, support and small infrastructure by local governments. And the agency’s “rightsizing” program will complement this new division of labor, not only in infrastructure but also in the social sectors. Some agencies will shrink if not abolished, other agencies may grow.
Economy Secretary Balisacan briefly discussed the Philippines Development Plan (PDP) 2023-2028 which comprises the eight-point program, among them: protecting household purchasing power, sound macroeconomic fundamentals, ensuring conditions fair competition and maintain public order.
Central Bank Governor Medalla announced a further small interest rate hike in August at the Monetary Council meeting, while ruling out another large “off-cycle” rate hike.
In a presentation for the Infrastructure team, Public Works and Highways Secretary Bonoan showed a map of the Luzon Spine Highway Network (LSEN) program, a total of 1,213 kilometers of completed toll roads, in construction and proposed that will reduce travel from Ilocos. to Bicol regions from 20 to just nine hours. Then there is the Inter-Island Link/Mega Bridge program, including the Bataan-Cavite Bridge (32.2 km) and the Panay-Guimaras-Negros Bridges (32.5 km). And the various port, airport and rail projects. Beautiful big projects that will need rapid and sustained economic growth to finance them and make them a reality.
Energy Secretary Lotilla has stressed the need for more power plants, a larger power supply base, and broader or more diversified energy sources. This energy diversification will include nuclear energy and new natural gas through investment incentives in the upstream sector. I support them and the additional goal of 100% electrification of homes nationwide, including remote barangays.
The dirtiest and most dangerous sources of energy are candles and household generators, not coal and nuclear power plants. A friend based in Calapan, Oriental Mindoro, told me that so far they still had power cuts for three to five hours a day, sometimes twice a day – horrible. More candles means more fires and more destruction of property and even death of people. More generators means more air and noise pollution.
SLOW GROWTH FROM WEST
Last week, GDP growth for the second quarter (Q2) of 2022 was released by a number of industrial and Asian countries. I averaged Q1 and Q2 growth in H1 (H1) and indicated whether H1 2022 was a strong (S), weak (W) or very weak (VW) recovery in Table 2 I say VW when H1 2022 growth is weak on the already weak H1 2022 recovery.
Last Sunday, former President Fidel V. Ramos died at the age of 94. I looked back at the macroeconomic numbers during his presidency (July 1992-June 1998), with the last three years of the Cory Aquino administration (1990-1992) as the reference period, and compared it with five other major economies ASEAN-6 (Table 3).
The Mount Pinatubo eruption, the Great Luzon earthquake and major power outages all occurred in 1990-91, so growth was negatively affected and supply chains were tangled, so inflation was high. President Ramos was able to achieve a rapid economic recovery in his first three years and reduce the rate of inflation. And it kept the momentum going when the Asian financial crisis hit in 1997-98 – the Philippines grew 3.5% in 1996-98 while Indonesia and Thailand experienced contractions.
You have done well as President of the Philippines, sir. Peaceful journey.
Bienvenido S. Oplas, Jr. is the president of Minimal Government Thinkers.