Despite the recent political circus happening in our national government as well as the massive sellout happening in our local stock market, it seems like the Asian Development Bank (ADB) and the International Monetary Fund (IMF) both have a different outlook on the Philippine economy.
According to forecasts released by ADB and the IMF, this year’s gross domestic product outlook is now at 6.4 percent.
While some people may see this as a miracle in these tumultuous times, others have a fairly rational explanation as to why ADB and the IMF go against the grain of the mass outlook—and good reasons they have.
So why is there a more positive outlook on the Philippines? What are the current factors that should’ve made it otherwise?
Better than yesterday
Last year, the ADB posted moderate predictions on the country’ economic performance in the face of weak external demands and agricultural damage brought by El Niָño.
While they consider 5.8% GDP growth to be a decent figure, this pales in comparison with the forecast by the ADB for the years 2012, 2013, and 2013 at 6.7%, 7.1%, and 6.1%, respectively.
While outlook differs every year, there is one consistent factor that keeps the economy robust: the high percentage of private consumption. This year, it still remains the largest driving force in our economy.
“Growth in private consumption, which accounts for nearly 70% of GDP, accelerated to 6.2% and made the biggest contribution to overall growth from the demand side,” the report mentioned. “Household spending benefited from higher employment, remittance inflows from overseas workers, and low inflation.”
In addition to this, lower unemployment rate and the creation of new jobs—particularly in the IT-BPO sector—further fed household consumption in the Philippines.
Meanwhile, the Washington-based IMF said that the GDP projection for this year and next have been positive because of the strong economic performance of the Philippine market “despite external headwinds.”
The report furthered by saying that the Philippines has performed “well in recent years with rising potential growth and strong macro fundamentals.”
“Economic growth is supported by robust domestic demand and is broadly in line with potential, while the outlook for inflation is well within the target band,” the IMF added.
The ADB, however, based their outlook on data available up to March 9, 2016.
This means that political and economic events that transpired during the new administration hasn’t affected the forecast of the Asian multilateral lender.
Meanwhile, the IMG ended their assessment of the Philippine economy on September 14, “using observations culled by staff members during their annual health check of the economy in June and July that coincided with the change in administration,” according to BusinessWorld.
Brave new world
With both multilateral lending groups being optimistic about this year’s GDP, it’s hard to ignore the signs that may point otherwise.
President Rodrigo Duterte has other things in mind that may either boost or undermine the consistent positive rating of our country’s economy. These are the factors that may come in play during the next year’s forecast of our GDP:
- • For the first time in seven years, the Philippine peso fell to its all-time low as it went beyond P48 last Monday. According to Rappler, the consistent dip of the local currency was due to the “political and security concerns on the local front, and the looming US Federal Reserve rate hike.” This September alone, the peso has already dropped by 3.5%.
- Not so long ago, President Duterte mentioned that he had a conversation between Russian Prime Minister Dmitry Medvedev that he’s about to “cross the rubicon” with the United States and asked the former Soviet country to become a partner in trade and commerce. In addition, Duterte also eyes strengthening economic ties with China, a country that endangers our claims in resource-rich the West Philippine Sea.
- In contrast, the President’s increasingly aggressive statements against the United States may affect our future partnership with the country, now especially that there the western superpower is about to decide for their new leader. If it comes to a point that relations between two countries become strained, the Philippines is on the verge of losing its biggest economic partner.
- A few days ago, the Philippine Stock Exchange (PSE) has been rocked by net foreign selling that amounted to P16.9 million worth of shares. According to a report by the Philippine Star, investors “remained jittery over the Duterte administration’s foreign policy rhetoric that seemed to alienate the country’s trading partners and war on drugs that has raised questions on the country’s human rights situation, prompting them to pull their money from local assets.” However, PSE president and CEO Hans Sicat brushed off the said claims in an interview with Bloomberg, attributing it to the US Federal Reserve rate hike.
Whether or not these factors may affect the predictions of international financial bodies in the future, one thing is for sure: the country must capitalize on such forward momentum despite unfavorable headwinds encountered.