WEEKS before the filing of certificates of candidacy from October 12 to 16, three names were already on the public list of leading candidates for president in the 2016 elections.
I am, more frequently, being asked whether the new president would have less or bigger problems. I answered that the new president will have bigger problems because the Philippines is in a very different situation now than in 2010.
We always talk about the economy and poverty, which remain the country’s biggest problems, but these are not the only challenges that the new president must face.
I have listed five major areas that will present themselves to the new administration in 2016:
- The China problem. What must the new president do in the West Philippine Sea, where China continues its reclamation activities?
- The proposed Bangsamoro basic law. I don’t think the BBL bill, as originally crafted by the incumbent administration, will pass. If it does, it is likely that it will be rejected by the Moro Islamic Liberation Front.
- The communist insurgency, which has persisted for decades, will still be a problem.
- The drug problem. Numerous reports indicate that it has deteriorated.
- The peace and order situation. There is a growing perception among people that it has, and continues
to deteriorate.
Compared to these five issues, the economic problem may be the easiest challenge to the new president. This is not to say, however, that the economy can be set aside as a lower priority, because it is directly linked to the more serious problem—poverty
—that affects at least a fourth of the country’s 101 million population.
In the light of changes in the global economy and their impact on the Philippines, which I discussed in the previous series, let me begin this discussion on the economy.
On the economic side, the waters were very calm in 2010 when the presidency changed hands. In fact, GDP growth in the first half was very strong.
Based on data from the National Statistical Coordination Board (NSCB), GDP grew by 7.8 percent in the first quarter of 2010 and 7.9 percent in the second quarter. According to the NSCB, GDP growth in the first half of 2010 was the highest semestral growth since the 9.3 percent posted in the second
semester of 1988.
The NSCB said the agriculture sector was hit by El Niño at that time, but this was offset by improved confidence among domestic investors, election spending, the global economic recovery, increased capital expenditure of the
government and a low base.
GDP slowed down to 6.5 percent in the third quarter, but recovered to 7.1 percent in the fourth quarter, resulting in a full-year growth of 7.3 percent (compared with 1.1 percent in 2009), the highest annual GDP growth in the post-Marcos era.
Economic conditions are very different now. In 2010 the global economy was already recovering from the US-led financial crisis of 2008, so demand for Philippine exports was rising.
In 2010 the United States was lagging behind other countries that were emerging from recession, with growth at below 3 percent, unemployment above 9 percent and a federal deficit of $1.3 trillion, just below the 2009 deficit of $1.4 trillion.
On the other hand, China’s economy was defying expectations. Its GDP grew by 10.3 percent, allowing the country to dislodge Japan as the world’s second-largest economy.
Today the global economy is sailing on very rough waters, with the shift in the US-China situation. With weak demand from China, commodity prices have slumped. Oil prices, for instance, have plunged from $120 a barrel in 2014 to $40 in 2015, and Goldman Sachs is saying $20 a barrel is not a remote possibility because of oversupply.
The Philippine peso was hailed as the best-performing currency in Southeast Asia in 2012, when its value rose to more than 6.5 percent against the US dollar. It ended 2012 at 41.05 against the dollar. At that time, analysts were predicting the exchange rate to appreciate further to P39 to $1 in 2013. This year the exchange rate has breached the P47-to-$1 mark and people are predicting it could reach P48 to $1, if the Bangko Sentral ng Pilpinas (BSP) does not intervene. The BSP is hoping the average exchange rate for the whole year will stay within P43-P46 to $1.
Growth in the first half of 2015 fell short of expectations at 5.3 percent. The government’s target of 7-percent to 8-percent growth for the whole year has gone further from reality.
Meanwhile, poverty still affects 25.8 percent of Filipino families (as of the first semester of 2014), a slight improvement from 24.6 percent in the same period in 2013. Unemployment rate was at 6.5 percent in July 2015, a slight improvement from 6.7 percent in the same month last year, but underemployment increased to 21 percent from 18.3 percent during the same period.
This is the situation on the economy today. I hope it will improve in the remaining months and up to the second half of 2016, when the new president takes the helm.
Next week I will elaborate on the non-economic issues that the new president will face.
To be continued
For comments, e-mail mbv.secretariat@gmail.com or visit www.mannyvillar.com.ph.