Those who have to keep track of the performance of the Philippine economy for professional or academic reasons are doing two things at present. These are: (1) waiting for the release by NSA (National Statistics Authority) of its figure for the full-year 2016 growth of this country’s GDP (gross domestic product) and (2) preparing a forecast for the Philippine economy’s growth in 2017.
The first task is decidedly easier than the second. This is because the GDP growth figure for the first three-fourths of 2016 is already known, to wit, 7 percent, which is the approximate average of the 6.8 percent growth rate of first-quarter 2016, the second quarter’s 7 percent and the third quarter’s surprising 7.1 percent. Considering that these were no earth-shaking changes in the Philippine economic environment during 2016’s final quarter, an economic analyst would not be far off the track if his calculations were to produce a full-year GDP growth figure of around 7 percent.
The second task of a tracker of Philippine economic performance—preparing a forecast of the Philippine economy’s growth in 2017—is much more difficult. This is so for two reasons. The first is that 2017 is just beginning and there are no existing figures for prior-quarter performances of the economy. The second is that there are many more imponderables for the forecaster to contend with under the administration of President Rodrigo Duterte than under past newly-installed national administrations.
The remarkable performance of the economy in 2016—certainly during the year’s third quarter—was the product of the strong economic fundamentals (especially healthy fiscal ratios, strong reserve position, price stability and a sound commercial banking system) bequeathed to the Duterte administration by its predecessor. The fundamentals are still in place, but an otherwise fine economic picture is beginning to be clouded by bad sounds and movements on the political side of Philippine society. The history of this country has abundantly shown that the Philippine economy is unable to maintain a respectable growth rate when political instability gets in the way.
Assuming that the prevailing political circumstances do not change during the remainder of this year, what increase is the Philippine GDP likely to achieve in 2017?
The members of the international financial community—multilateral institutions as well as commercial and investment banks—have already announced their forecasts. Not one of them believes that 7 percent GDP growth will be possible for the Philippines in 2017, but they all forecast above-6 percent growth. The IMF (International Monetary Fund) expects the Philippine economy to grow by 6.7 percent (revised from the earlier 6.2 percent). ADB (Asian Development Bank) is not as bullish: it expects this country’s GDP to grow by 6.4 percent in 2017.
The foreign commercial and investment banks’ forecasts of 2017 Philippine GDP growth revolve around 6.5 percent. Barclays, the British bank, expects the growth to be 6.8 percent (previously 6.3 percent). The forecast of another British banking giant, HSBC (Hong Kong and Shanghai Banking Corporation) is 6.5 percent. The Japanese investment bank Nomura Securities is more sanguine about this country’s 2017 growth prospects; it expects Philippine GDP to grow by 6.9 percent this year (up from 6.7 percent).
From the foregoing it appears that the international community considers the 7.1 percent GDP growth of 2016’s last quarter to have been something of a fluke. This must explain why all the major international forecasts of 2017 Philippine economic growth are below 7 percent.
Do I think the Philippine economy is not capable of achieving 7 percent-and-above GDP growth on a sustained basis? I do, but not with the kind of disruptive political environment that Rodrigo Duterte is creating. A mixture of good economics and bad politics is bad for GDP.
Hopefully, the nation’s political situation will turn for the better as the year progresses. But as of today I would put the economy’s 2017 growth at no more than 6.5 percent.
E-mail: rudyromero777@yahoo.com