OUTSIDE THE BOX
THE comments coming from the government as to what is going to propel the Philippine economy in the next 12 months seem largely disconnected from reality.
On one hand, the government fully intends to speed up spending to “stimulate” the economy. In my column a few weeks ago, “2011: A wasted year,” I said that the year was wasted by a government that spent its time trying to figure out what to do and then doing nothing.
Now the government is rushing in (supposedly) to make up for what has not happened in the last 12 months.
My friend Boo Chanco in his Philippine Star column yesterday, titled “Govt spending alone won’t do it,” is partially correct. An economy cannot rely on stimulus spending for growth. Just ask the US.
However, government spending in a country like the Philippines does have a much greater economic effect for growth than in more developed countries. Further, in a small economy such as the size of the Philippines, the synergy of private spending, coupled with public spending is much greater.
While the government is building the infrastructure, such as a new major highway, the private sector is putting up the commercial and residential developments along that highway.
The Aquino administration blew it in 2011 and they cannot make up for it now.
Think back a year ago. There were signs that the West, particularly the US, was beginning to stabilize. The fear of a default of Greece was months away. China’s stock market had not dropped 25 percent and its property prices were not down 50 percent.
There was enthusiasm in the Philippines that 2011 would be the year of the public-private partnership infrastructure projects.
Going into 2012, Europe is on the brink of disaster with no one really knowing whether there will even be a euro by 2013. China is looking at a sub 7-percent economic growth possibility, which is the same as zero for that nation.
Philippine businesses are cautious, particularly against the current political climate. Foreign investments into the country are worse than in 2010 and the growth of in-bound money flows from all sources is slowing.
Now in 2012, the government says it is ready to go full- speed ahead while the private sector is cautious and a bit worried. That is the type of bad timing that causes major economic problems.
Listening to recent comments from the National Economic and Development Authority (Neda), I worry that perhaps they are reading reports and seeing data from 2010 and not 2011.
I was a little surprised to read this from Phil Star: “The retreat of Philippine exports that started last May has finally bottomed out. [Neda] expects the sector to bounce back by next year.”
Is Neda serious? Philippine exports in October fell an annual 14.6 percent and dropped again for the sixth- straight month. Electronic shipments, which make up nearly 50 percent of all exports, are down nearly 40 percent from 2010.
And where exactly is this “bounce back” going to come from?
People from the Center for International Trade Expositions and Missions (Citem) say the Philippines should export more furniture to China because of its real-estate boom. Good grief. Is anyone in the government aware of what’s going on? Property sales in Shanghai have fallen 70 percent since last year at this time. They do not need Filipino-made furniture.
Exports to the US, the second-biggest market, were down 12.8 percent from a year earlier. There is not going to be any “bounce back.”
The reality is that things are going to get worse in the West before they get better. Europe is facing a recession as well as a banking system failure. And the US? Let me share some facts with you.
A staggering 48 percent of all Americans are either considered to be “low income” or are living in poverty
There are fewer payroll jobs in the United States today than there were back in 2000 even though 30 million extra people have been added to the population since then.
The Federal Reserve recently announced that the total net worth of US households declined by 4.1 percent in the 3rd quarter of 2011 alone.
A higher percentage of Americans is living in extreme poverty (6.7 percent) than has ever been measured before.
From the BusinessMirror: “The total value of commodities traded within the country posted a 15-percent increase in the third quarter.” The only thing that is going to grow the Philippine economy is Filipinos.
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