The Christmas season festivities will soon die down, and people will go back to reality, as it were. Reality, for most people, is to face the challenges that were temporarily put on hold because of the holidays. In spite of what they are experiencing, most people would have said, “Pasko naman kasi.”
Some restaurants and fast-food joints have recently announced unavailability or limited supplies of their products. Shortages in chicken oil, fries, flour, onions, and burger patties have been cited. These products are sourced overseas by these restaurants and are being severely affected by the global supply chain crunch.
ON Monday, Filipinos will elect a new administration to lead them for the next six years. This is not just another election. It is a choice of who will take us through the rough and tough road ahead. If the country is a bus going up the hill of progress and development, there are potholes, rivers overflowing, and, worse, huge storms down the horizon.
AS the country entered the official election campaign season, we wonder about the economic platforms of our candidates. Most, if not all, continue to talk about jobs, income, and affordable public services, which are not necessarily bad. But we must be more specific on how jobs will be created so that people can have sustainable incomes and livelihood and that they could access public services easily and within their resources. The pandemic has negatively affected the services sector of the country, which contributes the largest to economic output.
It’s the last day of 2021. We had hoped at the start of this year that the pandemic would end. With vaccines and the assumed adaptation of different non-pharmaceutical measures, we were looking forward to getting out of the difficult lockdowns. Alas, here we are, apparently at the beginning of another, but hopefully smaller, increase in case numbers. We’re not alone; the West is currently experiencing highest number of daily cases. The good news is that hospitalization and mortality numbers haven’t followed the steep upward trajectory. Nonetheless, the rapid increase in infected persons can still put pressure on our already tired health system. The question is: Are we going back to square one again?
Last week, the ACERD Director, Dr. Cielito Habito, talked about the potential growth paths of the economy in light of the lockdowns. Under the most optimistic scenario, the economy can get back to its 2019 gross domestic product level by late 2022. However, if we keep bungling our recovery, then we are looking at 2025. Hence, the title of this column says it all.
Recent data coming out of the United States are suggesting strong economic recovery. They also point to a sustained one unlike those we have seen last year. Foremost is the April jobs data generating about 9.3 million new postings, the most in more than two decades. This outpaced estimates by more than a million. The data suggest that firms are now prepared to hire more as the pandemic is showing signs of easing in the US. Normality is becoming clear as evidenced by the crowds in the NBA playoffs. As summer approaches, more outdoor activities and travel are expected to open and create demand more than it was a year ago, and possibly higher than before the pandemic struck. However, there is a puzzling outcome from the labor demand side—only 6.1 million jobs were filled! There are more than 3 million jobs that remained open. How can this be, with so much jobs available and so much people also remaining unemployed?
The Asian Development Bank (ADB) released their updated forecast of the Philippine economy for 2021 on April 28. They cut their earlier forecast of a 6.5 percent in December 2020 to 4.5 percent. It was said that this forecast is a floor, meaning this is the lowest and it could be higher. They cited that the reimposition of stricter quarantines has caused them to adjust their forecasts downward, particularly in the first half of 2021. This forecast is much lower than the government target of 6.5 percent to 7.5 percent growth. Our own estimates at ACERD last January was already at the lowest range among those gathered by Consensus Economics at 2.9 percent. Taking into consideration the reimposition of restrictions, it would definitely be lower since the affected areas effectively represent more than half of the economy’s source of output.
There have been concerns that rising inflation and the country remaining in recession will be leading to what is known as stagflation. Coined in the 70s during the oil shocks, stagflation is a confluence of rising prices, high unemployment and essentially an economy that is in recession. Unlike the economic events of the Great Depression wherein the economy went into a tailspin of falling demand, output and prices, stagflation can put an economy into a dilemma of which policy levers to move. As we are generally aware of, price increases are caused by both supply and demand conditions. In a recession economy where unemployment is high, demand tends to fall and retreats itself into essential consumption. This in turn will send signals to firms to decrease production.
Neda has proposed that the country be put into the more lenient quarantine level—modified general community quarantine—by March. This proposal makes a lot of sense considering that the country is limited in bringing back business and consumer confidence as result of the restrictions. As data of cross country performance in 2020 are now mostly out, we find that the long quarantine restrictions have weakened confidence significantly that the country’s economic decline was the deepest among the Asean 6 (Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam). Secretary Ramon Lopez of the Department of Trade and Industry is in the right direction in saying that we are not recovering faster than our neighbors.
I was recently asked the question if you have P300 million today, will you buy a penthouse in Shangrila Fort or 2 houses in Ayala Alabang? Straight away I answered that if I have that money, I will buy neither of the two! I reasoned that the economy we are in today sharply projects a K direction. This is because the higher income members of society have not been able to spend as usual in the last 10 months and therefore generated a significant amount of savings. This “excess” savings, I believe, is fueling asset accumulation in stocks and real estate (including crypto currencies)—taking that slack and possibly the advantage as asset prices fell last year. While individually this is good and secures good returns when the economy rebounds, this is blindsided.
Third week into the New Year, it maybe that some people are struggling to meet the resolutions they have made this year. The last time the Social Weather Station (SWS) reported on the fulfillment of resolutions was in 2019. About 10 percent of those who made resolutions were able to fulfill them. In the same report, 67 percent of those surveyed no longer made any resolutions, so, effectively, the 10 percent came from the 33 percent who made some kind of resolution. The 67 percent who did not make resolutions were higher than the 53 percent in 2017. The survey does not have details on what kind of resolutions Filipinos make. In other platforms, we find that the most common resolution that people make has to do with losing weight, exercising or eating healthy. In a 2015 article, US News reported that 80 percent of those who made resolutions in January have given up by the middle of February or just six weeks after. The percentage is large and can more or less approximate the reasons why an increasing number of Filipinos are making less resolutions. It looks like a universal challenge in our modern society. However, as we are still in the middle of a pandemic and with most people still spending more time at home, it is possible for those who made resolutions this year to pull through a higher percentage.
Welcome 2021! New year, new hope! These are what we usually hear when the year opens. When I was in elementary school, I do not like New Year’s Day. To me it was a sign that Christmas is about to end. No more carols, no more holidays—in a few days we will be back to what is reality. In the old school year, after the Christmas break is the exams for the third grading period or the mid-terms in college. This is the fact that we are facing these coming days—facing the exams of life and going back to reality. The Christmas season has somehow eased fears and anxiety brought by the pandemic. Although subdued and quieter than usual, the season helped bring up a bit of economic confidence. The data in the Google mobility report showed that the first week of December showed the closest return to the baseline mobility prior to the lockdowns. Indeed, Christmas have pulled the economy in the last weeks of 2020.
AS the Third Quarter ends and the more relaxed general community quarantine continues for another month, people are wondering if the economy is now recovering and are we regaining back confidence. As my colleague, Dr. Aldaba, wrote last week, the critical signs that need to bring back confidence hinge on addressing the health aspects immediately. Beyond that, we are also monitoring leading economic indicators that signal its trajectory whether continuing downtrend or reversals. We consider the following latest data releases from the Philippine Statistics Authority and the Bangko Sentral ng Pilipinas (BSP)—employment, manufacturing output, overseas Filipino workers (OFW) remittances, and real estate price index. These four indicators are showing reversals from the economic downtrend but we need to validate if these are blips or they are indeed turns from the corner.