Credit OFWs, BPOs for recovery

House Speaker Martin Romualdez credited the country’s higher-than-expected full-year gross domestic product (GDP) growth rate in 2022 to President Marcos Jr.’s leadership and decision-making.

“Under the able leadership of the President, the nation’s GDP has been above seven percent for the first six months of his term,” the Speaker said.

Really? But the President hasn’t made any major economic decisions yet, unless being sleepless worrying about inflation counts.

The President’s only significant economic decision was to reopen the economy. It was a no-brainer given that every country in the region has done that.

Indeed, he may not even understand economics.

Marcos disagreed with the report of the Philippine Statistics Authority that the inflation rate was at six percent last June, the fastest rate increase since 2018.

“I think I have to disagree with that number,” Marcos said in a press conference after his first Cabinet meeting. “We are not that high,” Marcos said.

Then he fumbled a few times on economic decisions that would have tamed inflation. He stopped a recommended sugar importation only to later approve importing more volume than earlier recommended as the shortage kept retail price at about P100 a kilo.

Then he was indecisive on onion importation, only to allow it too little too late as the retail price went up to over P700 a kilo. Unfortunately, the allowed importation may get here too late and end up competing with local harvests.

The good GDP number is thanks to consumer spending powered specially by OFW remittances and earnings of BPO workers. There is also an element of “revenge spending” as the country exits from pandemic restrictions.

Some economists also attribute the good number to “base effects” … that the high figure is coming off from really low figures during the pandemic. Fitch Solutions observed:

“Official data released on January 26 showed that real GDP in the Philippines expanded by 7.2 percent year-on-year in the fourth quarter of 2022, edging down from 7.6 percent in the third quarter of 2022. This was in part a reflection of base effects.

“In seasonally-adjusted terms, the economy slowed to 2.4 percent quarter-on-quarter in the fourth quarter of 2022 from 2.9 percent in the third quarter of 2022. Cumulatively, the Philippines economy expanded by 7.6 percent across 2022 as a whole, which finally brought output back above the pre-pandemic level, by around two percent...

“At Fitch Solutions, we expect real GDP growth to slow from 7.6 percent in 2022 to 5.9 percent in 2023, more downbeat than the government’s forecast range of six to seven percent.”

Here is how independent economist Alex Escucha sees it:

“We just got into a deeper hole than the rest of ASEAN, and the 2022 GDP growth simply means the Philippines is just about to get out of that deep hole. We just recovered to where we came from in 2019, barely.

“On aggregate GDP basis, the Philippines is 2nd to last in ASEAN to go back to 2019 levels.

“On a per capita basis – we are not yet completely out of the hole, still lower at 99 percent of 2019.

“In the meantime, because Vietnam was the only ASEAN country that did not suffer a GDP drop during the pandemic, it already overtook the Philippines in per capita GDP. So, the boast of having the fastest growth in ASEAN is an empty one.”

Clearly, Malacanang had little to do with the good GDP numbers. Duterte, during the first half, and Marcos in the second half were mere bystanders mesmerized to inaction by the galloping inflation numbers.

Food prices fueled Philippine inflation, which accelerated to a 14-year high of 8.1 percent in December. That brought the full-year average to 5.8 percent, higher than the 2021 average inflation of 3.9 percent and well above the government’s two percent to four percent target.

Since the Philippine economy is fueled mainly by household expenditure, high food prices may have tempered consumption of other products. That’s why ordinary people are saying they are not feeling the good effects of the high GDP growth rate.

Marcos called food inflation an emergency situation that is keeping him awake at night. But he himself may have aggravated food inflation with his response to sugar and onions.

Credit for the good economic numbers belongs to OFWs and BPO workers who are powering consumption in the country.

“Consumption accounts for roughly 72.8% of all economic activity and, given its sizable contribution, it’s not a stretch to say that the Philippine economy will only go as far as consumption will take it,” ING, an investment bank, noted in a THINK article last year that still holds.

“With incomes constrained, Filipino consumption patterns changed. Spending was focused on the basics: food, shelter and in today’s economy, a reliable Wi-Fi connection to attend class or work from home…

“Spending on all other items, however, saw a sharp drop as Filipinos cut back on discretionary spending or were simply unable to do so because of mobility curbs.

“Limited access to income forced households to dip into their savings… This new dynamic for households has implications for the Philippine growth outlook…

“Thus, we believe that the pandemic left households with low savings levels which will eventually work to dampen consumption and weigh on GDP given its sizable contribution to overall economic activity.”

So, it is too early to pop up the bubbly. The President as Agriculture Secretary has so much to do because the sector that produces our food hardly grew last year. There are also food cartels that must be dismantled otherwise food inflation will remain a problem.

To keep the economy humming, we have to mind our principal export: OFWs. We have only deployed 780,000 as of October as reported by the Department of Migrant Workers. We deployed over 2 million in 2019.

During the first 11 months of 2022, preliminary figures show the value of cash remittances sent to the Philippines amounted to approximately 29.38 billion U.S. dollars.

On the other hand, the Philippine business process outsourcing (BPO) industry according to IBPAP, the industry association, currently employs 1.44 million full-time employees and recorded $29.1 billion worth of revenue in the first half of 2022.

We hope in the years ahead, we can look beyond OFWs and BPOs for economic growth. If that happens, that’s when some credit can be given to the political leadership. Right now, wala pa.

Boo Chanco’s email address is [email protected]. Follow him on Twitter @boochanco