THE Xavier University Department of Economics has organized a forum on Economic and Financial Markets Outlook last September 20, 2018. The resource speaker was Mr. Emilio “Jun” Neri, Jr., the lead economist of the Bank of the Philippine Islands and board member of the Philippine Economic Society.
Mr. Neri discussed the current performance of several key macroeconomic indicators that for me is worth reflecting.
First, the higher interest rates in the United States placed additional pressure on the Philippine peso. This makes me rethink if President Duterte was right in blaming US President Trump’s inward looking policies as one of the culprits in the rising inflation in the country. Trump’s protectionist stance hurt China more than the United States. Only a small parcel of the US economy comes from trade, while China is a heavily exporting country.
A higher interest rate increases the influx of foreign capital, including Chinese investments, into the US economy. This means that, in the Philippines, foreign investments might pull-out and transfer to the American soil. As a result, there will be lesser dollar supply in our economy, which weakens the peso and leads to inflationary effects. Maybe President Duterte is right after all.
Second, the National Food Authority (NFA) cannot be blamed solely on the rising inflation on agricultural products. Vegetable inflation is higher than rice inflation coupled with rising prices on fish and meat.
Disastrous typhoons and other weather disturbances cause the higher prices on vegetables. The higher prices on feeds cause the meat inflation. Meanwhile, the depletion of fish supply in the Philippine seas causes fish inflation. The tuna industry in General Santos City has experienced a huge decline on tuna production due to lower catch on fish. The industry has become less competitive forcing the local workers to look for alternative income sources.
Third, the Philippines is no longer the sick man of Asia. From 2010-2017, the country has experienced a 6.4 percent average growth on real GDP compared to 3.1 percent in 1980-2009. The Philippines even has a better growth performance than Indonesia, Malaysia, Thailand, and Vietnam.
Although, seasoned economists like Noel De Dios explain that this growth performance is inevitable. Standard growth theory tells us that poorer countries experience greater GDP growth than richer ones. Thailand and Malaysia are upper middle income countries, while Philippines, Indonesia, and Vietnam are lower middle income countries. Thus, it is only expected that the Philippines would grow more than our richer neighbors. However, the higher GDP growth has been long overdue. We are already late in fulfilling our potential as a country.
Lastly, there is a decline in regional GDP (RGDP) growth in Northern Mindanao from 7.6 percent in 2016 to 5.9 percent in 2017. Fr. Bobby Yap, the President of Xavier University and also a seasoned economist, mentions that this is due to the Marawi siege. The output of Region 10 has been significantly disrupted by the socio-political tension in Marawi. Davao region has been also growing since the beginning of the Duterte Administration. It is third in 2016, next to Eastern Visayas and Central Luzon.
Second in 2017, just 1.2 percent lower than the RGDP of the Cordillera Autonomous Region. This is good in the sense that other regions have grown significantly than the imperial National Capital Region. However, I am not yet convinced on whether investments and economic opportunities are equitably distributed in the country side, or there is only a “transfer” of investment and economic node to another region, say on the President’s bailiwick. The challenge now is how to enable the less performing regions to catch up – this is crucial in making federalism a success.