It’s tough to be the Philippines

column-John Mangun-OUTSIDE THE BOXTRYING to find any positive comment about the Philippines is like trying to look for golden chicken eggs. What you do find is a constant barrage of expressions of disbelief that the Philippines could be anything more than a Third World “basket case.”

Countering these arguments that the Philippines has no business considering itself a serious member of the international community is a waste of time. It is like trying to argue with the wind. Facts are not as important as opinion. Comparisons do not need to be accurate if they “prove” a point.

The Philippines is now being included in the group of “emerging markets.” Even then, the “experts” cannot agree on a definition of it. Columbia University’s Emerging Market Global Players project does not include the Philippines, while the FTSE International group (owned by the London Stock Exchange) considers the country a secondary emerging market. International financial institution Morgan Stanley does put the Philippines on its emerging-markets list, while Dow Jones & Co. does not.

But when you compare these nations’ economies, it is hard to figure how they are lumped together with the Philippines.

A nation’s debt is a critical issue, and one way of measuring overall risk is to look at external debt in relation to international foreign-exchange reserves. The Philippine ratio is less than 100 percent, slightly lower than Thailand’s. But other emerging markets have ratios that are considerably worse by a wide margin. Indonesia’s debt-to-reserve ratio is over 200 percent; Chile’s, 300 percent; and Poland’s, 400 percent.

That is like comparing four people who make the same amount of income, but with a credit-card debt of P100,000, P200,000, P300,000 and P400,000, and seeing them as all the same. It makes no sense.

Another important economic factor to consider is the net amount of money coming into an economy, as opposed to going out: The current account (CA). A surplus CA means that more money is flowing in than flowing out. It is also measured as a percentage of total gross domestic product. London-based bank Barclays just estimated that the Philippines’s percentage will be 4.2 percent for 2014. That compares with the United States, which will show a ratio of -2.2 percent for 2014, and that Third World basket case, the United Kingdom, with -4.4 percent.

But we all know it is a country’s banking sector that must be secure and stable, and one way to measure that is that sector’s external bank debt to foreign-exchange reserves. Philippine banks come in at less that 20 percent, while Thai banks are at 30 percent and Indonesian banks are at over 40 percent. Philippine banks are in a much better shape than those in China, South Africa and India.

The important differences between nations are not always found in the headline economic data. We know that the Philippines is entering a “sweet spot” of age demographics with a growing young work force. There are those that even think this is a negative.

One of the reasons the Philippine economy has performed well in the last few years is because of our 20-to-30-year-old citizens, an age group that is growing at a fast rate. Interestingly, this particular age group in the US is also the largest in history. In fact, the largest US age group is currently the 23-year-olds. But unemployment in that group has also never been greater, at over twice the national average. Furthermore, in the US, the 20- to 24-year-olds are earning 45 percent less than the national average. The 25- to-30 age group is making 10 percent less.

In the Philippines, the 20- to 30- year-olds are making nearly 20 percent more than the national average gross income, which is one of the highest in the world, according to Euromonitor International. Certainly, the numbers are twisted because of a low national average wage. But the income growth in that age bracket is helping drive this economy. It is not all remittances anymore.

Sales of deodorants increased by 6 percent in value terms in 2013. Sales of men’s clothing grew by 7 percent in current value and 2 percent in volume terms. 2013 sales of infant wear grew by 5 percent. Even sales of cotton buds were up 6 percent.

The Philippine economy is experiencing a renaissance that has been building over the last decade, and we may be soon leaving other emerging markets in our dust.

Suntrust banner2
Turning Points 2018