THE economy may have suffered a hiccup when the inflation rate seems to be acting up and the peso depreciating below the 53:$1 mark. But these are minor setbacks in the economy. Major indicators point to a robust economy despite the stock market turbulence and the temporary rise in prices of goods and services.
The inflation rate, for one, albeit over 5 percent, is certain to go down toward the end of the year. The abrupt surge in rice prices will also come to an end once the government floods the market with imported commodity soon. The trade deficit is swelling due to the combination of surging imports and weak exports. It should be noted, however, that imports are surging because of the noticeable increase in the inbound shipments of capital goods after the government accelerated its infrastructure program.
The Philippines is weathering these disturbances, if you may call them as such, because the country’s macroeconomic fundamentals have remained solid. The Philippines registered a 6.8-percent economic growth rate in the first quarter of 2018, the second fastest in Asia.
The labor situation, meanwhile, is improving. The country’s unemployment rate as of April this year dropped to 5.5 percent, down by 0.2 percent from the same period last year with 625,000 jobs created. Of this number, 605,000 Filipinos were employed in manufacturing and construction.
The country’s economic managers, led by Finance Secretary Carlos “Sonny” G. Dominguez III, have so far kept the macroeconomic fundamentals intact with strong revenues and a manageable fiscal deficit. Reputable foreign financial institutions noticed the
Philippine growth story and gave the nation a good housekeeping seal of approval.
The relatively good reviews from the International Monetary Fund (IMF), World Bank and global debt watcher Moody’s Investors Service are proof that macroeconomic fundamentals of the Philippines have remained solid. The IMF retained its 2018 growth forecast for the Philippines at 6.7 percent but warned that rising inflation and external developments, such as the trade tension between bigger economies might threaten sustained expansion. IMF mission chief Luis Breuer, however, noted that the Philippine economy was performing well. His team predicted that the Philippines would sustain the pace in 2018 and 2019, “underpinned by strong consumption and investment, including public investment.”
Moody’s agrees. Strong GDP growth, it said, could accelerate even further, especially if the government achieved higher spending on infrastructure. It sees further progress “on improving government revenue on the back of additional reforms and ongoing enhancements in tax administration, which would also help keep government debt stable.”
The World Bank also kept its 6.7-percent growth forecast for the Philippines this year and in 2019, as sustained private consumption and higher government spending are seen offsetting the uncertainties coming from the external front.
“Overall, it is anticipated that real GDP growth will increase towards the end of 2018 and into the first half of 2019 with higher election-related spending,” the bank said.
Birgit Hansl, World Bank lead economist for the Philippines, noted that higher private investment levels would be critical to sustain the economy’s growth momentum as capacity constraints became more binding.
Having strong macro-economic fundamentals will attract foreign investments that, in turn, will create more jobs. I believe the country’s economic managers are doing a good job in reining the economy despite the volatilities in the global financial markets and the threat of a trade war among the world’s major economies.
The steady remittances from our overseas Filipino workers and increasing tourism receipts will also help protect the peso. In sum, the economy has built a strong base and is resilient enough to assist businessmen, including the small entrepreneurs.
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