Tuesday, 9 June 2009

Philippine economy has almost tripled in size

Tony Lopez
Manila Times

The latest Pulse Asia survey still shows a deep distrust for President Arroyo. Only 25 percent of the people have a big trust in her; half or 48 percent have either a small or no trust at all.

This is sad. Among all presidents, she has done the best for the economy.

A strong economy is Arroyo’s defining legacy. The first eight years have seen 32 quarters of consecutive and sustained economic growth, the best and the longest in the country’s history.

Average per capita GDP growth was nearly 5 percent during the first eight years. Average per capita GNP growth was 5.5 percent. Per capita GNP at current US dollars doubled, from $967.3 in 2001 to $2,060.6 in 2008 or a daily income of $5.64.

Middle class country

This makes the country middle class because the World Bank and global benchmark for middle class income is between $2 and $10 a day.

In GNP terms, President Arroyo greatly expanded the size of the economy from $68 billion in 2001 ($967.3 per capita times population size of 70 million) to $185.4 billion ($2,060 per capita times 90 million). That’s a growth of 173 percent in eight years or 21.6 percent per year. In less than a decade, the economy increased in size 2.72 times even as 20 million more Filipinos were born during her presidency.

The NSCB has warned of a recession because GDP grew by 0.4 percent in the first quarter. In Australia, the GDP grew at half that rate, by 0.2 percent. Yet, the Australians see growth ahead. They were supposed to be in recession and yet, it did not happen. To me, a 0.2 percent growth is a statistical error. Yet, the Australians are euphoric and we are not.

All presidents, from Ferdi-nand Marcos to Joseph Es-trada, suffered either a recession or a massive decline in growth in their final year of their reign. Can President Arroyo escape this jinx?

My view is that recession need not happen. President Arroyo has instituted substantial economic reforms to make the economy competitive and keep growing. The consumer base has expanded by almost three times under her.

The Philippines’ major Asean neighbors, notably Singapore, Thailand and Malaysia, are all having a recession. Only Indonesia and the Philippines have eluded the ignominy, thanks to their large consumer base.

Manuel V. Pangilinan, in his speech before the MAP in January, declared the Philippines will not escape the unpleasant effects of global financial crisis. But he remained optimistic, for one reason: “A large portion of the country’s gross domestic product [84 percent] is accounted for by domestic consumption and government expenditures, while net exports account for no more than 4 percent of GDP.”

Pangilinan suggests infra spending, focusing on the country’s core-growth areas, rather than spreading it around the country. These core areas include the National Capital Region, the Central to Southern Luzon growth corridor, the Metropolitan Cebu area, and the Metropolitan Davao area. “Not only the government but also the private sector should mobilize, direct and focus their infrastructure spend in these strategic locations,” he said.

Private sector role

Indeed, it is time for the private sector to pitch in. The taipans and tycoons of this country tripled their wealth during Arroyo’s presidency. True, some of them suffered sharp declines in wealth in the last quarter of 2008. The market cap of their companies went down by as much as 85 percent. Since then, however, stock prices has risen dramatically, such as Ayala Corp. whose share price has climbed 77 percent from its November low of P171 to a near-high of P302 as of June 8.

Areas that can be ramped up to prevent a recession include housing, telephony; electricity and water services, other services, and agriculture.

Increasing housing inventory now makes sense because interest rates are at historic lows, construction material costs have come down by at least 30 percent from their early 2008 highs, it is job generating, and it has spillover effects on 15 other industries. Developers have plenty of internally generated cash from IPO proceeds (Vista Land for instance raised P15 billion last year) and profits from sales of low to medium housing units.

We have 50 million cellular phone subscribers—26 million of PLDT-Smart, 15 million of Globe, and nine million of Sun Cellular.

In other countries, cellular phone ownership equaled if not exceeded the population figure. If rates come down, networks are expanded, and content is improved, the Philippines can double subscriber base to 90 million. Ayala’s Manila Water will increase capex this year to P10 billion from P8 billion in 2008. They just got their water franchise renewed for another 15 years. Manila Water says it will generate 21,000 jobs every year and provide P5.3 billion in concession fees to the government.


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