7.1%

The market’s response to the announcement we achieved 7.1 percent GDP growth in the third quarter was described as “muted.” Although our economy has apparently risen to a higher growth plane, there was no dancing in the streets.

The “muted” response was due to a number of factors. To begin with, there are dark clouds on the horizon. The incoming Trump administration could send hundreds of thousands of undocumented Filipinos residing in the US fleeing back home. That will result in a significant reduction in remittance flows.

Remittances from Filipinos abroad kept our head above water the past several years as our exports lost competitiveness, as our industrial base shrunk and as our tourism fell way behind our neighbors. We need that volume of remittances to keep our economy strong.

Many fear Trump’s intention of bringing back American jobs to America could force a cutback in our BPO industry. This sector earns billions of dollars for our economy and helped fuel the construction boom. It created jobs for millions of young Filipinos.

The 7.1 percent growth also happens in the wake of a presidential election. Historically, we have always had better growth (and higher inflation) during election years. The growth tapers off in the intervening years.

Another factor explaining the high growth is that our agriculture was not damaged by extreme calamity. Our agriculture grew at its usual marginal rate and did not drag down the rest of the economy as it does when struck by calamity.

Notwithstanding all the qualifiers mentioned above, the 7.1 percent GDP expansion is remarkable in its own right. It establishes us as the fastest growing economy in Asia, surpassed here and there only by much smaller economies elsewhere. It is growth on top of a base of sustained expansion since the Macapagal-Arroyo years.

The last time one could really speak of a “base effect” on an otherwise impressive growth rate was in 2012. That was because our economic growth for 2011 was miserable due to the underspending of the Noynoy Aquino administration. The previous administration, to recall, manufactured “savings” to feed into the notorious DAP – a mechanism that broadened political discretion over how the budget was used. The Supreme Court declared that unconstitutional but only after damage to the economy was inflicted.

This is a different time with a different dynamic.

The new administration appears bent on using public spending to fuel economic expansion. Budget Secretary Ben Diokno, staunch critic of the previous administration’s underspending, advocates relaxing budget deficit targets and speeding up the infrastructure modernization program. That will surely help maintain our economy’s pace of expansion.

Industrialize

Our economic managers envision sustained growth of at least seven percent over the next generation. That is the only way to bring down poverty and raise our GDP per capital to high-income levels.

On the basis of sustained seven percent annual growth, the Duterte administration hopes to bring down the poverty rate to 15 percent or lower. That will involve rescuing about 1.5 million Filipinos from poverty each year.

Fortunately, on its first quarter in office, the administration saw 7.1 percent growth posted. It would have undermined confidence in the economic leadership of this administration if growth fell below that mark.

The pace of growth we have achieved can only be achieved if we are able to industrialize. In the present global economy, no nation achieves industrialization without support from government. That support can only happen if there is a clear plan.

Without a clear industrialization plan and firm policies, our vulnerable industries will be heir to the uncertainties of the global market. Domestic industries could be wiped out overnight by dumping from large economies such as China. We need a detailed anti-dumping policy guaranteed by government.

For instance, the US, the European Union, India and several other major economies have erected anti-dumpling policies against Chinese steel exports. We have yet to do the same, our vulnerability to these exports notwithstanding.

China has a large excess capacity in steel, especially after her growth rate began to moderate. To support her own steelmakers, Beijing offers export incentives and subsidies. This will enable China to flood foreign markets with her excess steel that, in many instance, have proven to be substandard.

In the absence of clear anti-dumping policies and weak enforcement of product standards, our local steelmakers are put under pressure. In the name of trade liberalization and helping our consumers access to cheaper steel, local importers have tried to bring in large volumes of Chinese-made steel. These importers take no risk in their purely commercial ventures. They create no new industries in the country and no new jobs for Filipinos.

Under present policy conditions, we will never be able to build a fully integrated steelmaking capacity. Without such capacity, our ability to build the infra we need and the homes our people require will be limited by external market conditions.

The matter is similar to our rice situation. In the short term, we might be able to please our rice consumers by opening doors to unlimited importation of the basic commodity. Over the longer term, however, this will eradicate rice cultivation in the country and imperil our food security. In the end, we will have rice only if our neighbors have surpluses.

This is the reason our policy on rice trading is so hotly contested. What might be good for consumers in the short run could make our rice farmers extinct in the long run.

That illustrates the steel import situation. Carpetbaggers could make a load of money in the short run but doom our industrialization eventually.