Fourth Quarter Opportunities and the President’s First 100 Days
This is the time of the year when people spend more money to celebrate the Christmas season. The last three months of the year will be a hectic pace for most people planning reunions toward the end of the year and organizing their travel options, and those finalizing their list of gifts and presents for the yuletide.
Such fourth quarter spending and activities will boost the Philippine economy no doubt, especially toward the end of the year when 13th month pays and bonuses are released to our workers.
For President Ferdinand Marcos Jr., I expect him to be business as usual during these remaining three months of the year given the present economic challenges, as he has been in his first 100 days in office.
The Marcos administration, I must say, performed creditably well during the first 100 days and ably handled the economy despite a myriad of challenges coming our way, such as market volatility and rising commodity prices caused by supply chain disruptions in China and the war in Ukraine.
In such a short time, Mr. Marcos has inspired confidence among foreign and local investors by visiting the United States and Singapore, and underscoring infrastructure development as a top priority of his administration.
He led the inauguration of the Metro Manila Subway Project in Pasig City last week—a signal to the world that he would pursue even “grander dreams” and more ambitious endeavors to bring comfort and progress to the Filipino people.
More importantly, the President allowed the economy to perform at full capacity, without losing sight of the risks from Covid-19, which is still a threat to our society. More people have returned to their jobs as businesses reopened to meet a rising demand from local consumers.
Imports are at an all-time high—an indication that factories operate at a higher capacity and require more raw materials and inputs for production. Filipino consumers are buying big items such as vehicles again, thanks to banks that are ready to lend at low interest rates despite the threat of an elevated inflation.
While it is true that the Bangko Sentral ng Pilipinas adjusted the benchmark borrowing rate by a total of 225 basis points to 4.25 percent to catch up with the more aggressive monetary tightening of the US Federal Reserve, bank loans have actually recovered from near zero growth registered at the height of the pandemic. The 12.2-percent loan growth in August, for instance, could translate into a strong gross domestic product growth in the third quarter.
But unlike other countries where monetary tightening is expected to lead to recession, the Philippines seems insulated from shrinking demand for credit. Bank loans for real estate activities rose 13.9 percent in August and those for manufacturing increased 15.9 percent from a year ago. These data to me are telltale signs of a strong economic performance.
The peso’s recent drop, meanwhile, is temporary. I expect the local currency to recover in the fourth quarter, normally a strong season for remittances.
Overseas Filipino workers and their families will benefit from the current foreign exchange rate—and I can surmise that real estate sales will pick up as we approach the Christmas season. The peso value of dollar remittances has gone up by about 15 percent since the start of the year, providing OFW families with more disposable income.
Other sectors that will benefit from robust remittances are retail, tourism, transportation, education, health care and other services that now account for a large part of our gross domestic product. Remittances account about a tenth of our gross national income with magnified impact on the rest of the economy.
I am optimistic about the fourth quarter not only because of remittance growth, but also because of the enhanced mobility that allowed hotels, resorts and airlines to increase their operations and employ more workers.
Per the data of the Philippine Statistics Authority, the unemployment rate eased to 5.3 percent in August from 8.1 percent a year ago, with the number of jobless individuals dropping by more than a million from 3.9 million to 2.7 million during the period.
The economic reopening will ensure that recovery will be sustained and our targets will be achieved. Consumer spending is now on a rebound and will likely peak in December, supported by the release of the mandatory 13th month pay and the optional bonuses to over 30 million government and private sector employees.
With greater mobility to consumers, more micro-, small- and medium-enterprises are expected to be back on their feet and employ additional workers. The outlook for the fourth quarter, thus, is promising.
You can count on it.