A presidency to revive our economy

The Philippines’ economic recovery is getting downgraded every month by the credit rating agencies, by the economic think tanks, the Asian Development Bank, the World Bank, the IMF, by the big international banks, and by the big Philippine banks. While our GDP/economy had bounced back partially from the depths of 2020 in the three quarters of 2021, it will probably be in the last quarter of 2022 that our economy will get back to the level/size of the GDP in 2019. We lost two years of economic growth, almost doubling unemployment and under-employment, increasing poverty incidence back to 25%, and deteriorating public and health services.

The election is eight months away and the winning candidates need to accelerate and enlarge our economic growth to get us out of this recession faster. I used the term “candidates” and “presidency”, because for the economy to recover we really need a strong and capable incoming administration, and a development-oriented legislature and a judiciary. We need an “all hands on deck” approach, one that the current administration could not muster in managing the pandemic. The incoming president has to attract, assemble, and inspire a competent team to pull out our economy fast and strong.

The problems of developing countries such as criminality, rebellion, terrorism, poverty, unemployment, deficient public services, illegal drug addiction, graft and corruption are really consequential problems due to size of their economy relative to the population, the inability of the government to grow the economy, equitably benefit and provide the basic services to the citizens. Good government and good governance are the primary and basic factors for good economics. This is true in all kinds of ideology, be it democratic, socialistic, monarchic, or communistic, but the more effective and lasting success seem to be the socially democratic governments practiced by the Scandinavian countries. This is also validated by the long, peaceful reigns of biblical and medieval regimes in Europe and the Middle East.

Since the beginning of the high 6% plus growth trajectory of the Philippine economy in 2010 up to 2019, the consumption component of our GDP has increased up to 70%, while investments and government expenditures were at 20% and 10%. Since this pandemic, consumption has decreased by 50%, that the rise in government expenditures and investments were inadequate to offset the consumption reduction. The government is now also reaching the limits of revenue generation and borrowing capacity, as tax revenues are stagnating and government borrowing is now 61% of our GDP. This is over the manageable and prudent 60% limit for debt servicing, recommended by International Credit organizations. The only variable in this, Consumption + Investment + Government = GDP equation is the investment component. This is what the incoming presidency will have to work on and increase fast and large; to increase annual investment to P8 trillion in the next five years from the current P4 trillion. This will be a combination of private foreign, and domestic investments, and some government investments. The “build, build, build” projects will have to be funded via public private partnerships since the government cannot fund them from the annual government budget.

Given these economic and consequent social problems that they will inherit from the present administration over and above the necessary competence, teamwork and dedication of the next presidency, the next president will have to be an inspiring leader able to gather local and international support for the government. Filipinos and international businesses will have to pour in trillions of new investments like in the time of Cory Aquino after toppling the Marcos dictatorship in 1986 up to the Ramos years of 1998. So, the 2022 election and who we elect as president is critical and crucial for our country.