The economy is dangerously unraveling

Should we bring out the steroids and the amphetamines? Do we get some cocaine and add heavy doses of caffeine? Wait, let’s not forget the Viagra. Whichever it is, let’s leave the Fentanyl behind. Let’s inject some intravenous shots to this sluggish economy and hopefully, it will be up and running in no time.  

How I wish it was that simple, but sadly it’s not. The economy is not like you and me. It’s not a wobbly old man who can miraculously function again with anti-erectile dysfunction pills, nor is it like me who can run on a cup of freshly brewed coffee and a dab of cherry red lipstick.  

It needs so much more. And fast.  

This “darling economy” “took a breather” and to put it bluntly, it’s not good. In fact, it’s getting really messy — messier today than yesterday, and it will be messier tomorrow than today.  

It came not with a bang, but with a whimper, these cracks we’re seeing -- small, soft sobs at first, then louder groans, and soon perhaps, there will be a shrieking cry like that of a helpless child’s loud incessant wailing.  

Two months ago, the burly court jester in the white palace called it the “darling economy.” 

But darling it is not. On the contrary, the Philippine economy is dangerously unraveling.  

Growth slowed to a disappointing six percent in the second quarter of the year, the lowest in three years, no thanks to a slowdown in industry, almost no growth in agriculture, and a still to happen golden age of infrastructure.  

This implies that the Philippine economy has to expand by at least 7.7 percent in the second semester to attain the low-end of the government’s seven to eight percent target for the year. This, of course, is impossible. 

What happened? 

Manufacturing grew by just 5.6 percent in the second quarter of 2018 from eight percent a year ago.  

Agriculture’s growth slowed to a measly 0.2 percent from eight percent a year ago, pulled down by dismal harvests of sugarcane, crops, palay (unhusked rice), mango, corn, cassava and coffee, according to government statistics. 

Both government spending and private consumption were also anemic, rising softer while net external trade contributed negatively to growth.  

In the three months to June, government expenditure rose 11.9 percent, slower than the 13.6 percent, growth in the first quarter.  

Household consumption – the actual spending of Filipino households -- expanded 5.6 percent during the quarter, barely unchanged compared to the 5.7 percent increase in the first quarter. 

And if you look at the trade data, imports rose faster than exports. Exports increased by 13 percent, but imports rose faster by 19.7 percent. 

These numbers don’t mean much for majority of Filipinos. The desperately poor struggle to survive, day in and day out. Growth must accelerate at a much faster pace for it to trickle down. 

But the numbers should be enough to prompt the administration to do more. Inclusive growth can only happen if the economy continuously grows by at least eight percent.

 To do list 

We need a strong manufacturing sector. There is a need to develop new industries because our foreign exchange earners are at risk. The once saviour of the economy, the IT-BPO is under threat because of artificial intelligence and President Trump’s protectionist policies.   

But I’m not sure which industries the government wants to champion. All we get is a sense of what it doesn’t like – mining, casinos, problematic tourism resorts. 

The manufacturing sector isn’t producing enough because new technology is catching various industries  – as in the electronics sector – by surprise.

 For agriculture, the department needs to focus more on helping local farmers boost their harvest by providing more financing and linking them with buyers, among others. 

The government also needs to spend more and enhance the country’s long-term prospects. This can happen by increasing the economy’s productive capacity through infrastructure.  

The current government has identified 75 priority projects under its much touted Build Build Build infrastructure program. These are seen to ensure sustained and long-term growth of the domestic economy, if it does take off. The projects really need to get going. This would create new jobs for Filipinos and help fuel growth. 

Inflation 

Against this backdrop, there’s that soaring inflation – toxic, stubborn, persistent. And it remains a thorn on our side – 5.7 percent in July -- no thanks to the bad judgment of our monetary authorities who were way behind the curve in raising policy rates.  

The bad news is that inflation hasn’t peaked yet. It will continue to go up unless a miracle happens. Consumer spending will slow, as Filipinos continue to tighten belts. Companies are already hurting because of inflation and higher fuel costs. And of course, being the businesses that they are, they will pass on the pain to consumers.

We will soon see smaller burgers and pizzas and less toppings on our rice toppings for the same or worse, higher prices. As bad as that sounds, that’s already luxury for others who may not even be able to put food on the table.  

And this, dear court jester is what the economy looks now – it’s anything but darling. 

Iris Gonzales’ e-mail address is [email protected]