‘The economy in 2023’

The national economy in 2023 will follow a growth path that is predicted in part by the country’s development program.

Expectations. Accordingly, the growth of output – the GDP – would be in the order of 6.5 percent. But it could be higher if the year-on-year performance of 7.7 percent achieved in the third quarter of last year is used as guidance.

Global economic conditions, however, are not bullish in 2023. The threat of recession has not been completely discounted. In October, last year, the global forecast for economic growth made by the IMF was set at 2.7 percent, which was lower than that of the previous year.

The head of IMF Kristalina Georgieva, in an interview reported by Reuters at the close of the year, reiterated that this year will be “tougher than the year we leave behind.” The main engines of global growth – the US, Europe, and China – are all experiencing weakening economic activity.

But each country is different. East Asian countries have shown much greater economic growth performance than the rest of the global economy.

The Philippines belongs to this set. The World Bank recently reduced its outlook for growth from 5.8 percent to 5.7 percent for the year, but that is twice the global growth rate. Likewise, the Asian Development Bank has followed this optimism about us.

Could 2023 be a banner year for us? Despite the uncertain and relatively poor global outlook, the Philippine economy is still on the brighter side of world developments.

It is quite fortunate that the new administration can reap the benefits from major economic reforms undertaken in the previous government. Those who have been readers of my column will understand that I am far from satisfied. We should really undertake more bold economic reforms.

For one, we should hurry up being part of the global economy. For years, we have tended to make the talk, but are afraid to make the walk.

Our leaders – especially those in Congress – should learn to walk the talk! For decades, slow economic reforms at home had only strengthened our dependence on OFW remittances. We create good employment of Filipinos abroad by driving able-bodied skilled people to look for jobs abroad and not at home. We should really make sure that we succeed in attracting more foreign capital into the Philippine economy to energize the homefront. A growing economy at home will also keep Filipino savings at home robustly. Otherwise, we only continue to drive Filipino workers seeking good quality jobs to foreign shores and some home-shore capital to look for better investments elsewhere.

One major move that should be done is to ratify the RCEP, which in essence is an enlargement of the ASEAN free trade area. And we should take steps to improve our competitive position within ASEAN by being more aggressive in bringing in more foreign direct investments into our shores, especially the ones with high global presence.

In the course of decades, we lost the edge that was in our midst by standing still in the reforms that our neighbors were pursuing to become integrated within the trading world. Some ASEAN countries have pursued that relentlessly, even while we took very slow steps to accept parallel reforms. (Incidentally, why it took us too long is that many restrictions are imbedded in our political constitution.)

This year promises some strengthening of resolve. Politically, the government is in a good position to pursue more reforms. I hope it does not stop on the reforms inherited from the Duterte administration because they are not enough although already ground-breaking in substance for the succeeding government.

By strengthening the infrastructure program and by encouraging new investments in energy expansion (spurred by, in addition, foreign investments), two major deficiencies in the economy are seriously being attended to.

Strengthening governance. There are many other aspects of maintaining an economy that supports growth. Certainly, assuring a sound fiscal basis for running the development program is a major part of policy.

Sustaining public investments in social and physical infrastructure spurs the growth path. This includes the improvement of the tax system to finance the budget, developing a sound debt management strategy, and undertaking timely and appropriate tax reforms. It also means wise policies on economic subsidies so that development is enhanced rather than deterred.

This is a large topic in itself. So is the problem of eradicating corruption and encouraging efficiency in government processes. Some laws and regulations breed opportunities for corruption. In fact, even institutions created to prevent corruption can become corrupt. Minimizing if not eradicating corruption is often the essence of government.

But let me comment on a recent “technical glitch” in the Manila International Airport communications system that stranded travelers on New Year’s Day and which affected both domestic and international flights.

This is a major incident, an international embarrassment, and potentially damaging to the government’s tourism development program, which is a major component of the national development plan.

Such an event can be tolerated during major weather disturbances and other calamities. But airport communications and management is a function that we should be able to deal with so that the normal functions are performed seamlessly. The function of proper governance is to assure that technical glitches are always under control.

*      *      *

For archives of previous Crossroads essays, go to: https://www.philstar.com/authors/1336383/gerardo-p-sicat. Visit this site for more information, feedback and commentary: http://econ.upd.edu.ph/gpsicat/