Recovery in Full Swing
Almost all the economic figures we’ve seen in the past few weeks point to a strong Philippine recovery this year. The numbers are a telltale sign that the gross domestic product (GDP) performed creditably well in the January-to-March period, and would do much better in the succeeding months if we fully reopen the economy.
The emerging indicators provide us hope that we can attain pre-pandemic economic levels this year and lift more Filipinos out of poverty. I do not blame our economic managers if they are upbeat on the country’s growth prospects this year. Such enthusiasm is not without bases, as most businesses observed more hectic activities beginning in the fourth quarter of 2021, which likely picked up further in the first quarter of 2022.
Even the conservative Asian Development Bank, which looks at complete data sets, expects the country’s GDP to grow faster in 2022 and 2023, after the 5.6-percent expansion in 2021.
One concrete indicator is the Purchasing Managers’ Index (PMI), a gauge of manufacturing output, which rose to a three-year high of 53.2 in March 2022. A PMI above 50.0 indicates an expansion in the manufacturing sector.
The Department of Trade and Industry interpreted the latest PMI reading as a sign of a robust first quarter GDP performance and further expansion in the coming months, following the easing of mobility restrictions and the implementation of health and safety protocols as virus transmission in the country continued to ebb.
I share Trade Secretary Ramon Lopez’s optimism that all signs point to a recovery in full swing starting March and in the coming months. His positive outlook is supported by the recent Bangko Sentral ng Pilipinas report that net inflows of foreign direct investment reached a record $10.5 billion in 2021. The higher numbers mean foreign companies are preparing to expand their production capacity in the country.
This decade may be the start of high investment growth in the Philippines, after our Southeast Asian neighbors like Singapore, Thailand, Malaysia and Vietnam drew most of the FDIs going into the region in the past few years. It is time for us to be the leader in FDI generation in Southeast Asia.
The economic reforms under the Duterte administration will help us achieve this goal. These reforms include a focus on “Build, Build, Build” infrastructure projects, an overhaul of the taxation system through the Tax Reform for Acceleration and Inclusion law and Tax Incentives for Enterprises Act, as well as the lifting of restrictions on foreign capital through the amendments in the Retail Trade Liberalization Act, the Foreign Investments Act and Public Service Act.
But it is equally important to acknowledge the challenges that lie on the road to recovery. For one, the pandemic is not yet over, with new variants posing a threat to our freedom of mobility. Then, there is the indirect impact of the Ukraine-Russia conflict that disrupted global trade and pushed crude prices higher.
Yet, despite these seemingly insurmountable challenges, our economy remains stable, thanks to the careful handling by the Duterte administration. Finance Secretary Carlos Dominguez III is correct in saying that President Duterte has “masterfully steered” the Philippines from being an inward-looking economy to one that is ready to compete with the rest of the world.
Infrastructure spending, as a percentage of the GDP, reached more than 5 percent under the Duterte presidency. Infrastructure projects are critical in decongesting traffic in Metro Manila and linking provinces and islands across the country.
The government’s response to contain the spread of the pandemic also deserves accolade from the public. The implementation of health protocols and massive vaccination over the past two years prevented more deaths and put us in a better position today, compared with our Asian neighbors.
We have fully inoculated over 70 percent of the target population against the virus, allowing us to reopen our economy and catch the attention of foreign and local investors.
With the Philippines now under low-risk classification, we can manage the situation better and retrace our economic growth path towards an upper middle-income status. This would soon translate into a reduction in unemployment and poverty rates.
The ADB predicted our recovery would gain traction this year, underpinned by rising domestic investment and consumption as pandemic restrictions eased.
The ADB sees our GDP growing by 6.0 percent in 2022 and 6.3 percent in 2023, after the government lifted mobility restrictions and eased international travel. Airlines, hotels and other tourism establishments are hiring again.
I am also optimistic that we will rebound strongly from the pandemic-induced shock and remain resilient despite the war in Ukraine. We have solid economic fundamentals and policies. They have served as part of our first line of defense against the pandemic and geopolitical upheavals.