Sunday, 19 July 2009

Philippine GDP to grow at least 4% in 2009

Manila Bulletin

The bad news: for the first time in the lifetime of most of us, the world's Gross Domestic Product will decline in 2009 as a result of the global economic crisis especially victimizing the developed nations in the world, including East Asian tigers like Japan, Singapore, Taiwan, Hong Kong and South Korea. The positive growth of 4 to 8% of emerging markets like China, India, Indonesia and the Philippines will not be enough to counteract the steep declines of as much as minus 7 to 9% of the industrial nations.

The good news is that the Philippines is one of the few countries in East Asia that will register a positive growth rate. I am willing to bet that our GDP will grow at 4% or more, despite the gloomy prognostications of some of the leading international agencies and multinational banks. The forecast of 1 to 2% coming from these international institutions have given short shrift to relatively strong performance of the agricultural sector on the income side and of private consumption expenditure on the demand side. With the focus of the stimulus package of the Government on agricultural production and countryside infrastructure, incomes in the rural areas can grow at 4% or more. With OFW remittances remaining at the same level as last year of over $16 billion, the purchasing power of the households of the OFWs will increase by some 6% as a result of the depreciation of the peso.

The marginal propensity to consume of these households is quite high. That is why private consumption expenditures will increase by at least 4 %. The foreign analysts do not fully understand the dynamics of OFWs. Filipinos overseas workers are in a category much higher in quality than the average immigrant worker from such countries as India, Mexico, Turkey, Romania, Peru, etc. My almost two years of recent residence in Spain gave me an opportunity to observe closely the exceptional qualities of Filipino immigrant workers as compared to other nationalities. They are usually in personal services that require above-average human qualities of smooth interpersonal relations such as in nursing, caregiving, waitering, customer relations, teaching, and domestic services. Not only are Filipinos well known for their very cheerful dispositions. They also practise personal hygiene that is uncommon to other cultures. Anyone who has traveled far and wide in the Philippines would know that even the poorest of the poor in this country take a bath everyday, even if they have do it in the middle of the public square, using public faucets. As a matter of fact, there are restaurants in Barcelona--where I just spent almost two years as a Visiting Professor in a business school--that employ only Filipinos as waiters.

My message to the foreign analysts is that their forecasting models do not take into account the fact that Filipino workers will be the last ones to be laid off, especially in countries whose demand for immigrant workers comes predominantly from the swelling ranks of senior citizens who now account for close to 20% of the population in almost every European country, not to mention in Japan and other Northeast Asian countries. That is why even if Filipino workers in the textile and other manufacturing industries in such countries as Taiwan and South Korea will be sent home, the number of new Filipino workers that will deployed in nursing, caregiving, teaching, and domestic services in the aging societies will at least equal if not outnumber the OFWs coming home. Even in the international shipping industries, in which Filipinos account for 25 % of the manpower, the feedback I get from the shipping companies in Manila is that the new seamen being deployed outnumber those who are being sent home as ships are being mothballed massively in such international ports as Singapore and Hong Kong.

Another reason why I think that the Philippine GDP will grow at 4% or more in 2009 is the additional stimulus that will come from the billions of pesos that the candidates for the May 2010 elections, which spending can be expected to start during this coming Holy Week and will gather steam by Christmas 2009. Considering the lead time needed for campaigning in this country, the bulk of the expenditures will actually be in 2009. Already one could notice all the pictures of potential candidates in the Metro Manila area appearing in posters containing their hearty congratulations to the students of high schools and universities graduating in March 2009. My own personal calculation of all the spending of presidential, senatorial, House of Representatives, and local officials is about 80 billion pesos.

In fact, some of my professional colleagues think that this amount is an underestimate. Be that it may, such an amount will go a long way to stimulate consumption spending just at the right time when the economy needs a boost. My advice to companies that market consumer goods and services is to be aggressive and creative in capturing all this purchasing power that will come especially from the Philippine countryside.

I am glad that our leading mall operators have spread their retailing outlets far and wide in the rural areas and are not focusing only on Metro Manila. The regions that will especially benefit from the growth of 4% or more will be Northern Luzon, Central Luzon, Southern Tagalog, Central Visayas, Northern Mindanao and Southern Mindanao. Especially benefiting from the expansion in consumer demand in the regions outside of the National Capital Region are the logistics or supply chain companies. Expect the Philippine Nautical Highway to be especially busy in 2009, not only in the transport of goods but in the increasingly buoyant domestic tourism. As they cut back on traveling abroad, many middle-income Filipinos (there is an estimate of 14 million of them) will be traveling to tourist spots in Palawan, Bohol, Negros Oriental, Southern Tagalog and other regions.

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