Over the last month or so, watching the ABS-CBN television show Minute to Win It: Last Man Standing has become part of my evening routine. Of course, that is a terrible confession to make, but we all have our little vices.
We must assume that all in the game are just as eager and dedicated to be the winner. But if you look closely as the game progresses, there are notable differences that become apparent.
Some contestants are actually more interested in how they appear before the audience and lose some concentration. Others, in spite of years onstage, seem to be nervous and lose focus. Certainly, dumb luck sometimes determines the outcome, but, usually, it comes down to doing the basics well, as in most of life.
Whether you accept it or not, the global economic situation is a disaster, and is only going to get worse. If you are listening to the economic pronouncements of the political establishment in the West, that “All is Well”, then you are in trouble.
In June the World Bank lowered its 2016 global growth forecast to 2.4 percent, from the 2.9-percent rate projected in January. That is a 17-percent reduction. To put that in perspective, imagine your own company lowering its revenue estimate by 17 percent. In the private sector, that would be called a disaster, not as the International Monetary Fund described it as “subdued growth”.
If you have ever gotten yourself in a financial hole with too much debt, then you know that debt is a killer. Corporations have much more flexibility than individuals when it comes to debt. A department store, for example, can fire a few employees to improve its gross profitability. If a payment is coming, it can have a sale to raise cash. But ordinary people cannot do that. You can’t fire one of your children to lower your electric bill.
Maybe the most important and critical positive for the Philippine economy is the low amount of consumer debt. This may save the country when the global economic situation gets worse—and it will.
Philippine household credit, which includes mortgages, auto loans and other forms of consumer credit, is only 6 percent of the country’s GDP—one of the lowest in the world—compared to 10 percent in Indonesia and an average of 25 percent of GDP in other emerging markets. By comparison, Thailand is in deep trouble right now, as its percentage is 70 percent.
Maybe even more decisive is the household debt-to-income percentage. In the US it is 100 percent, meaning people owe as much as they make. Thailand is in deep trouble right now, as its ratio is 120 percent. South Korea, along with Malaysia, is at over 140 percent. Filipino consumers owe an astoundingly small 3 percent of total household income.
Manageable debt is supposed to be a basic principle for a successful economy. Too large a debt is simply wrong. Apparently, Filipinos are some of the few people in the world who remember that. The Philippines will survive and thrive in the economic turmoil to come.
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3 comments
Of course it will thrive – but can the government share with 100 million? I guess we will see if 20 million decent wage jobs can be created under Duterte.
As far as the “astoundingly small 3 percent of total household income”, it’s not so much the Filipinos remember household debt, it’s the fact that the overwhelming majority have never had the chance to accrue household debt. Credit card use is so low simply because most do not have nor qualify for that kind of credit – credit which those numbers, for the most part, are based on (or are the major cause of).
Regardless of the reason, his assertion remains and hopefully puts the Filipinos in a better position to weather financial storms.
I, my family, and our friends here in the Philippines have lots of chances to accrue household debt, but we take good care not to. We have several credit cards, but we use them only when really necessary. Even if we use credit cards, we pay what we owe as soon as we receive the bills. We don’t like borrowing or owing money (borrowing money for business–that’s another story). We always try to live within our means, yet we live comfortably, get enough good, healthy food, go on vacations in and out of the country, pay for entertainments, etc. In short, we live simply.