Once again it’s that time of the year when we look back and pick out the developments that had the greatest impact on the Philippine economy. Barring any dramatic happenings between now and December 31, the following are the stories that had the greatest impact, favorable or otherwise, on the Philippine economy during the twelve-month period that is about to end.
Unquestionably the most important happening in 2016 was Typhoon Duterte. In one of the most remarkable electoral victories in Philippine political history, former Davao City mayor Rodrigo Duterte won the May Presidential election – and became the nation’s 17th Chief Executive – with a mere 38 percent of the total vote. Although a plurality President, Rodrigo Duterte lost no time talking and acting as though he had won an overwhelming mandate. His ruthless war against the drug trade, his profanity – directed, among others, to Pope Francis, US President Barack Obama and UN Secretary General Ban Ki-moon— and his foreign policy move away from the US and towards China have taken their toll on the Philippine economy. Unnerved businessmen and investors have pulled out their funds and put investment decisions on hold. As a result, the peso has taken a big hit – it has now breached the P50 to one US dollar mark and the stock market has been behaving erratically.
The formation in the House of Representatives of a pro-administration supermajority encompassing all the major political parties was another major development of 2016. With the ranks of the Opposition all but decimated, the prospects of passage of Rodrigo Duterte’s campaign promises – especially a shift to a federal type of government and broad reform of the tax system – were now much brighter. Time will tell whether the supermajority will undergo erosion as Mr. Duterte’s popularity begins to wane.
On July 12 the Hague-based Permanent Court of Arbitration announced its decision to side with the Philippines in the arbitration case filed by this country in connection with China’s claim of sovereignty over virtually the entire South China Sea. China declined to take part in the proceedings and has refused to accept the PCA ruling. From the geopolitical standpoint the Philippines’ victory is of enormous consequence. From the economic standpoint the victory is of great significance in view of the vast oil and gas deposits known to lie beneath the Reed Bank and other parts of what has come to be called the West Philippine Sea.
The announcement that GDP (gross domestic product) grew by 7.1 percent in the third quarter meant that, barring a decline in the last quarter, this country will grow in 2016 by close to 7 percent – probably the fastest in Asia – in 2016. The pace of economic activity this year was given a substantial push by stepped-up government spending related to the mid-year election. The Philippines clearly has ceased to be Asia’s sick man.
The uncertainty and tension associated with President Duterte’s careless and reckless statements manifested themselves in the depreciation of the peso to its lowest level in eight years. As 2016 draws to a close, the peso-dollar exchange rate is hovering in the vicinity of 50 pesos. The government’s supporters have been quick to attribute the peso’s weakening to the positioning that the financial community undertakes in anticipation of an expected US Federal Reserve policy change. However, knowledgeable observers place the major part of the weaknesses at Mr. Duterte’s door.
The question “What happens when an environmental activist is placed at the helm of the Department of Environment and Natural Resources” has been answered by Mr. Duterte’s appointment of Gina Lopez as the head of DENR, which supervises the Mines and Geo-sciences Bureau. Secretary Lopez, who came to office with the mantra “There is no such thing as responsible mining” has been conducting herself much like a bull in a china shop, issuing suspension orders to even the oldest and most respected mining companies. Considering the Philippines’ position in the international mining community – especially in the markets for gold, copper and nickel – that, clearly, is not the way for the government to go.
One of Mr. Duterte’s campaign promises was quick action to put an end to the widespread endo (end-of-contract) labor practice in this country. Quick action there has been, and DOLE (Department of Labor and Empoyment) has lost no time having dialogues with the business community. In the face of increasing lay-off of workers by business establishments unable to afford regularized employment or unwilling to violate a no-endo law, DOLE appears to have reduced its anti-endo frenzy. Knowledgeable observers believe that the Duterte administration will have to rethink its position on endo.
The newest kid on the regulatory block, PCC (the Philippine Competition Commission), made its debut on the national economic scene by insisting on reviewing the joint purchase of Liberty Telecoms Inc.’s frequencies by this country’s telecoms duopolists – Smart Telecommunications Inc. and Globe Telecoms – over the objections of the two companies. When the Court of Appeals supported PCC’s position, Smart and Globe elevated the matter to the Supreme Court, which is expected to hand down an early ruling in view of the telecom industry’s importance to the economy.
The UN-sponsored Treaty on Climate Change came into effect after it was ratified by over 660 signatories. After incredibly threatening that the Philippines would not honor the treaty after having signed it, President Duterte gave the go-signal for Philippine implementation of the landmark international agreement.
This list of 2016’s most important business stories would not be complete without mention of OPEC (Organization of Petroleum Exporting Countries) and Russia to cut oil output after a long period of non-unity. Accordingly, oil prices begin to harden during 2016’s latter half.
Economically, 2016 has been a very good year for this country, but politically it has been a time of turmoil and instability. Bad politics has a way of upsetting the economic applecart. The way things look, is that likely to happen in 2017? It just might. Sad and frustrating.