Thriving in Adversity: A Tale of Endurance of the Philippine Economy

While highly developed economies reeled from the damaging effects of the global financial crisis of their own making, the Philippine economy managed to grow at a relatively high rate for the last two years. The growth rate was highest in decades for the country at 7.2% in 2007, while slightly lower at 4.6% in 2008. The price level of prime commodities was generally stable given a single digit inflation rate. There was no dramatic movement in the foreign exchange rates, while a positive overall Balance of Payments position was maintained.

The slowing down of the Philippine economy in 2008 is mainly an imported phenomenon (an aftermath of the global recession), and hardly an internally instigated occurrence. No less than foreign observers have singled out the Philippine economy’s resilience in the face of the global economic downturn.

Something good must be happening in the Philippines to turn up an encouraging economic performance. What could then be going right in the Philippines? What propels its encouraging growth amidst external pressure for reduced export demands, incessant internal political squabbles, and overblown negative reports by a hostile media?

What follows would be a remarkable yet verifiable accounts of the Philippine economy in general and its thriving private business sector, which would essentially depict the travails of its people . . . in a nutshell.

The Philippines has good leaders

The Filipinos are peace-loving people and the Philippines has been endowed with the right leadership at the most suitable time.

With the help of the people and the Catholic church, it was former President Corazon Aquino (1986-1992) who rebuilt democracy in the country from the ashes of the Marcos’ martial law regime (1972-1986). The era of President Fidel Ramos (1992-1998) was marked by rapid economic growth and political stability; while President Joseph Estrada (1998-2001) has inspired and empowered the Filipino masses (the poor and less educated).

To her credit, and against all odds, President Gloria Macapagal-Arroyo (2001-present) took several unpopular policy positions to push hard for the country's economic growth. As a practicing economist, she implemented various significant economic reforms including fiscal reforms (VAT imposition and rate increase despite heavy opposition, failed power grab attempts, and unproven corruption charges against her and her husband). Now, the country is reaping the fruits of her obstinacy and persistence. Her economic resiliency program is now being tested to help displaced workers who lost their jobs because of global recession. The program also aims at upgrading the infrastructure and at providing seed funding for small enterprises.

By 2008, the population is projected to reach 90.5 million, where 63.4% is of working age (15 to 64 years old). Thus, it is a sizeable market to provide labor for production, both for domestic and external demands. It is also a large consumer market which is ready to boost consumption expenditures, especially during the Christmas season.

The Filipino workers are world class . . .

The Philippines supply the world, not only with valuable domestic helpers, but also with English speaking and highly trained professionals working as nurses, engineers, teachers, and accountants; caregivers, entertainers, etc.. These are dedicated, hardworking and honest workers who in several occasions have returned money found and sacrificed long hours of work or their own very own lives for the love of their work.

. . . and they are our overseas and local heroes

These Overseas Filipino Workers (OFWs), while providing their talents and precious time enriching other nationalities overseas, also take care of their families at home and the economy through their more than $16.4 billion in remittances for 2008 alone, enabling the economy to register a net income. The multiplier effect of this considerable disposable income cannot be ignored as most families have a higher propensity to spend; the higher the consumption level, the better for the economy.

The Filipinos are creative, hardworking and pliant as a bamboo. For the families of the overseas Filipino workers who were left behind in the country, the underground economy is thriving well (small businesses like vending which are not captured by official statistics) and is supporting the ordinary family’s daily needs. If this can only be properly accounted for, it will definitely further push the national income accounts up.

The Bangko Sentral ng Pilipinas (BSP) or the Philippines Central Bank is looking at a modest peso depreciation but with overseas remittances showing some resilience, no weakening of the peso may occur this year. As of July 24, 2009, the Philippine peso –US dollar exchange rate was at 48.095.

Inflation risks remain subdued

The BSP said in April that Inflation may average 3.42 percent this year and 4.1 percent in 2010, slower than previous estimates. This gives the BSP scope to cut interest rates from a 17-year low and may use other policy tools should the economy worsen, according to the BSP Governor Amando Tetangco. When inflation is fairly low and predictable, businesses can make their plans and so more are willing to borrow.

Shares of stocks

The stock market is often considered an economic barometer or the primary indicator of a country's economic strength and development. The past trading days have seen the Philippine share prices performing quite well. Mr. Francis Lim of the Philippine Stock Exchange (PSE) has pointed out that in the first quarter of 2009, the Philippines stock was the best performer in the ASEAN region and that is something it can be proud of. This good showing makes him more confident in the performance of the Philippine stock market this year.

Favorable credit ratings

Moody’s Investors Service recently (July 24, 2009) announced that it has upgraded the Philippines’ foreign and local currency government ratings one notch higher as the country remains "resilient in the face of the global financial and economic crisis." The country’s government rating is now Ba3 from B1, the country ceiling for foreign currency bank deposits to Ba3 from B1, and the country ceiling for foreign currency bonds to Ba1 from Ba3 with "stable" outlook.

The upgrade brings the country three notches closer to being rated "investment" grade. Moody’s last upgraded the country in May 1997 from Ba2 to Ba1.

Industrial peace

The Department of Labor and Employment (DOLE) regards 2008 as another year when industrial peace "reigned" in the country with only five strikes recorded (from a high of 581 in 1986), the lowest in the seven decades of the agency's existence.

The Philippines occupies a strategic geographical location, acting as a potential gateway for investors to the Asian market.

The country’s climate is tropical, with average temperature varying from 75ºFto 87ºF (24ºC to 31 ºC). The northern half of the country has pleasant, near cool weather from November to February; a hot, dry season from March through May or June; and rainy weather from July to October when storms visit the area. The southern half of the country has a less changeable climate and is seldom affected by tropical storms.

The Philippines has resources of copper, gold, nickel and other minerals in the total value of up to US$840 billion, approximately the same level as Brazil. This highlights the vast potentials awaiting foreign investors in energy and raw materials sectors in the Philippines and the region as a whole.

The beaches in the country are captivating and among the best in the world. For this reason, among others, there are vast opportunities to be tapped for tourism and allied industries.

Happy conclusion

The long and the short of it, all Filipinos are heroes in their own right, not only for their respective families but to the entire nation as well. They have all the reasons to feel blessed, happy, thankful, proud of their country and individual accomplishments, wherever they may be. After all, thriving in adversity is not a mean feat. We show true courage when we choose to look at the glass as half full; not half empty. So, everyone must remain vigilant as the financial recovery is slow in coming.  Yet, it would seem that a cheerful disposition and an optimistic attitude will go a long way.