The robust 8.3 percent economic growth in the first quarter of 2022 is giving presumptive President Ferdinand Marcos Jr. a solid head start. He is not inheriting a weak economy. Rather, he is receiving a strong one—in fact the fastest-growing economy in East Asia—from outgoing President Rodrigo Duterte.
There were clear signs that the Philippine economy was growing at a faster pace in the first three months of the year. Laxer mobility restrictions enabled more people to shop in the malls, travel to their favorite destinations, and work and earn in the case of our ordinary workers.
The granular lockdowns enforced by the government to contain the spread of the Omicron variant of Covid-19 partially reopened the economy in January and February. President Duterte and his Cabinet opted against general lockdowns, which in the past did not successfully curb the infection rate and which, instead, stunted economic activities.
The granular lockdowns and phased alert level system that further reopened the economy for the most part of the first quarter succeeded in quelling the pandemic. Tourism rebounded as airlines increased their flight frequencies, sales of malls and restaurants markedly rose and more commuters were riding public transportation to go to work.
Economic and business activities expanded, while Covid-19 cases petered out. As the economic team of President Duterte summed it up, the government managed to restore jobs in the first three months of the year with the shift to an endemic mindset, increased vaccination rate and the granular lockdowns that allowed the majority of our people to work and earn a living.
The first quarter gross domestic product figures validated the response of the government to reopen the economy. The manufacturing sector grew 10.1 percent year-on-year, while wholesale and retail trade and repair of motor vehicles and motorcycles rose 7.3 percent. Transportation and storage activities surged 26.5 percent. Industry and services also expanded 10.4 percent and 8.6 percent, respectively.
An equally telling data released by the Philippine Statistics Authority is on the demand side. Household final consumption expenditure, which reflects consumer confidence, grew by 10.1 percent in the first quarter of 2022. Gross capital formation, which indicates investments in equipment, jumped 20 percent. Increased capital goods that include investments in buildings, machinery, equipment, vehicles and tools, means more companies are spending for the long-term. The positive gross capital formation augurs well for the economy in the succeeding quarters—it is an assurance that domestic production will rise further with the replacement of older capital goods.
The first quarter GDP has already topped the nation’s pre-pandemic economic output. But it does not mean smooth sailing for the incoming administration. The pandemic still persists while rising inflation amid the backdrop of the Russian invasion of Ukraine remains a concern.
I don’t want to second-guess the economic team of presumptive President Ferdinand Marcos Jr. I am confident, however, that his team will keep the strong macro-economic fundamentals built by the outgoing administration and the reform laws enacted by both houses of Congress.
Foreign and domestic investors alike want to see continuity in the economic policies of the outgoing administration, which, I believe, are pro-business. The Rice Tariffication Law, for instance, stabilized the price of the basic staple after addressing the supply situation. I also expect the new economic team to further expand the Build, Build, Build infrastructure program to create more jobs and speed up the delivery of goods and services.
The Duterte administration did well despite the pandemic that impacted heavily on the economy. The unemployment rate is down to 5.8 percent in March, which is the lowest since the start of Covid-19 years. Kudos also to the economic team headed by Finance Secretary Carlos Dominguez III and Bangko Sentral ng Pilipinas Governor Benjamin Diokno for keeping the Philippines’ ‘BBB’ credit rating.
The new president will face economic challenges for sure—and they are enormous given the large number of Filipinos who are still below the poverty line. But I remain optimistic he will find the solutions to the task of nation building. The strong economic performance in the first quarter has given him the inside track.
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