The Philippine economy thrived in 2019 amid major challenges and policy issues. Here are ten of the biggest economic developments and corporate news of the year.
Poverty rate falls to 16.6%
Poverty incidence, or the percentage of the population living below the poverty threshold, fell to 16.6 percent in 2018 from 23.3 percent in 2015, according to the Philippine Statistics Authority.
Finance Secretary Carlos Dominguez III said this put the government on track to achieving what had seemed at first as an ambitious goal of bringing poverty incidence to 14 percent by 2022, “as evidenced by official data showing that 5.9 million Filipinos were lifted out of poverty in three years”.
Data from the PSA showed that the number of poor Filipinos went down from 23.5 million Filipinos in 2015 to 17.6 million Filipinos in 2018.
Meanwhile, Economic Planning Secretary Ernesto Pernia said the unemployment rate dropped from 5.1 percent in 2018 to 4.5 percent as of October 2019, the lowest in the last ten years. “Even our underemployment rate eased to 13.0 percent from 13.3 percent in 2018,” he said.
Water contracts abrogated
President Rodrigo Duterte slammed concessionaires Manila Water Co. and Maynilad Water Services Inc. for alleged “economic sabotage” and the state-run Metropolitan Waterworks and Sewerage System eventually revoked the concession extension agreements with the two companies.
This followed a water shortage during the dry months of 2019 when the concessionaires resorted to water rationing amid the lack of new water resources.
Fitch Solutions Macro Research, a unit of credit rating firm Fitch Group, however, warned that this would undermine investor confidence in the short term as it exemplified the high regulatory risk which contracts between the government and private organizations were subjected to.
“We believe investors will be concerned over the possibility of similar instances of government intervention which would create uncertainty for their business operations. As such, there is a possibility that foreign direct investments may take a hit in the short term,” it said.
Tycoons pass away
Two of the Filipino-Chinese tycoons passed away this year. Henry Sy, the richest in the country who owns the largest property developer, shopping mall operator and bank, died on Jan. 19, 2019 at the age of 94.
Sy headed SM Investments Corp. which redefined the Philippine retail industry. His net worth at the time of his death was placed at $19 billion.
Sy’s contemporary and business rival, John Gokongwei Jr., the founder and chairman emeritus of JG Summit Holdings Inc. which owns Robinsons malls and Cebu Pacific died on Nov. 9, 2019 at the age of 93. At week later, his widow, Elizabeth Yu-Gokongwei, died at the age of 85.
On Nov. 11, 2019, Lucio Tan Jr., the newly appointed president and COO of Philippine Airlines operator PAL Holdings Inc. passed away at the age of 53. He was the eldest child of Lucio Tan Sr., the founder and chairman conglomerate LT Group Inc. and the remaining original taipan in the Philippines.
Last year, George Ty of GT Capital and MetroBank died at the age of 86.
Rice imports ease inflation
The open rice importation helped tame inflation rate this year, but affected the livelihood of local farmers.
Republic Act No. 11203, or the Rice Tariffication Law, lifted the quantitative restriction on rice imports starting February 2019. This opened the floodgates for rice imports which eventually dampened the domestic prices of palay to the detriment of 10 million farmers.
Finance Secretary Carlos Dominguez III said it was only under the Duterte presidency that the government was able to pass the Rice Tariffication Law after three decades of attempt by previous administrations. The law reduced the price of rice for over 100 million Filipino consumers and was envisioned to boost the productivity of palay farmers through the establishment of the annual P10-billion Rice Competitiveness Enhancement Fund.
As a result, inflation rate dipped to 0.8 percent in October 2019 from 6.7 percent a year ago. It also averaged 2.5 percent in the first 11 months of the year, within the government’s target range of 2 percent to 4 percent.
GDP growth recovers
The economy recovered in the third quarter from the initial slowdown in the first two quarters which were affected by the delayed government budget, the El Niño dry spell, water shortages and the US-China trade war.
“The Philippines stayed as one of the best-performing economies in Asia posting a 6.2-percent growth in the third quarter. We are the second-fastest growing major economy after Vietnam—ahead of China, India, Malaysia, Indonesia and Thailand,” Economic Planning Secretary Ernesto Pernia said.
Data showed that in the first three quarters of 2019, the gross domestic product grew 5.8 percent, just below the low-end of the 6 percent to 6.5 percent full-year growth target.
“Looking at these milestones in our journey, we see a stable economic performance for 2019, even as we remain vigilant and prepared to face risks such as the possible water shortages in 2020, weak global growth and stagnating world trade, disruptive technologies, and the volatility of oil prices. Our GDP growth is projected to be between 6 percent to 6.5 percent for 2019 and 6.5 percent to 7.5 percent in 2020 to 2022,” said Pernia.
ASF decimates 70,000 hogs
Authorities ordered the culling of 70,000 hogs in Luzon, following the outbreak of the African swine fever in Rizal, Bulacan and Quezon City.
The Philippines notified the World Organisation for Animal Health of the ASF outbreaks which resulted in the culling of about 70,000 animals, representing just a fraction of 12.7 million pigs nationwide.
The outbreak also affected the sales of processed meat products after several provinces imposed a ban on the transport of pork products such as hotdog from Luzon to the Visayas and Mindanao.
Members of the Philippine Association of Meat Processors Inc. reported billions in losses because of the restriction or ban imposed by several provinces on pork products.
Gov’t cracks down on POGOs
The Philippine government began to crack down on the so-called Philippine offshore gaming operators for their failure to pay income taxes.
Finance Secretary Carlos Dominguez III ordered the Bureau of Internal Revenue to shut down three major POGO service providers in a bid to collect income taxes from them.
The Department of Finance estimated that some 138,000 Chinese nationals were working in more than 200 POGOs, most of which were located in Makati City and the Bay Area.
A bill was filed in the House of Representatives to impose a 5-percent franchise tax on POGOs and a 25-percent income tax on their workers. Rep. Joey Sarte Salceda, the panel chairman and author of House Bill 5257, said the government could raise as much as P45 billion from these POGOs annually.
Traffic worsens
Traffic congestion worsened along EDSA and other major thoroughfares as the government and the private sector built projects such as the Skyway Stage 3.
Several proposals were also floated to resolve the problem such as the EDSA Expressway, Metro Manila Subway Project, Makati Intra-city Subway and the Makati-Taguig Skytrain.
The Management Association of the Philippines, on its part, recommended improved enforcement of regulations and fines to compel private and public motorists to comply. It asked authorities to designate stops for PUVs to quickly load and unload passengers and to declog bus lanes.
MAP estimated the cost of traffic congestion at about P3.4 billion or 13.4 million trips in 2019, translating into P250 per person per day.
Four Luzon gateways rising
The government and the private sector are now looking at four major gateways in Luzon, including a more enhanced Ninoy Aquino International Airport, Bulacan International Airport, Sangley Point International Airport and a bigger Clark International Airport.
San Miguel Holdings Corp. already bagged the $15-billion Bulacan airport project called New Manila International Airport, although the Department of Finance reportedly opposes its provisions on the material adverse government action and caps on liabilities of the government.
Meanwhile, MacroAsia Corp., a company led by Lucio Tan who owns Philippine Airlines, plans to team up with China Communications Construction Co. Ltd. to bid for the Cavite provincial government’s P500-billion Sangley Point International Airport.
The National Economic and Development Authority board earlier approved the P102-billion NAIA Rehabilitation Project that aims to double the airport’s capacity to 65 million passengers a year by 2024.
In Pampanga, Clark International Airport is building a new terminal that can accommodate more than 12 million passengers a year.
BSP cuts interest rates
The Bangko Sentral ng Pilipinas turned supportive of economic growth this year when it reduced the benchmark borrowing rate by a combined 75 basis points to 4 percent amid the softening of the inflation rate.
Inflation peaked at 6.7 percent in September and October 2018, forcing monetary authorities to raise the interest rate by 175 basis points. With inflation rate softening to as low as 0.8 percent in October this year and the economic growth falling below expectation in the first half of 2019, the BSP decided to resume its policy easing.
BSP Governor Benjamin Diokno hinted that the Monetary Board would continue the policy easing in 2020. The current borrowing rate of 4 percent is still higher than the record-low rate of 3 percent in 2017.
Aside from the interest rate reduction, the BSP also cut the banks’ reserve requirement ratio by 400 bps this year to 14 percent for universal and commercial banks in line with its plan to bring the ratio closer to single digit by 2023.