Merry Christmas

The year 2023 ends with a slower consumption demand; anecdotal evidence indicates December Christmas season 2023 sales were not as good as last year’s. This raises doubts whether economic growth will be strong enough in the last quarter to pull the whole year GDP growth higher than the 5.5 percent most economists predict for 2023.

Still, the Philippines’ 5.5 percent growth will be one of the highest growth rates in ASEAN and will beat China’s best effort economic gain of 5.4 percent by a hairline.

Per the World Bank, our economic growth will be 5.8 percent in 2024.

On two unpredictable fronts, the Philippines is looking good in its outlook for 2024 – inflation and global wars.

Global inflation was stoked mainly by the Russia-Ukraine war that crimped supplies of food and energy.

In October 2023, the International Monetary Fund projected global growth to drop to 3.0 percent this year from 3.5 percent in 2022, and further to 2.9 percent in 2024, thanks to a marked slowdown in the growth rates of the rich countries, from 2.6 percent in 2022 to just 1.5 percent in 2023.

Philippine inflation has been stubborn, hitting 5.82 percent in 2022 and about 6 percent in 2023. But it will be declining to the 2-4 percent target of the central bank over the next four years.

Ukraine-Russia and Israel-Hamas are the global wars of the 21st century. Both wars could end in a state of suspenseful uncertainty leading to a strategic stalemate.

Both Ukraine and Russia will claim to have won.

Ukraine’s much vaunted five-month summer counteroffensive has failed.

Ukraine has lost considerable population, considerable firearms, considerable backing from the West, defending a 1,000-km frontline, far longer than our 600-km Pan-Philippine Highway from Ilocos to Bicol.

Ukraine asked Western Europe for $54 billion in additional assistance. Denied. It asked for additional $60 billion from President Biden. Denied by the US Congress. Ukraine has used up 90 percent of its drone and munitions and replenishment, if any, has been slow in coming.

The West claims Russia has sustained over 315,000 casualties – killed and wounded, 87.5 percent of the 360,000 troops deployed when Moscow invaded Ukraine in February 2020. But Russia has captured 20 percent of Ukraine and created a clear line to a major warm water Black Sea port where it has strategic interests.

In the case of the Gaza war, after the Oct. 7, 2023 Hamas attack on Israel during which 1,200 Israelis were killed, the Israeli Defense Forces has killed more than 20,000 civilians, one percent of Gaza’s 2.2 million people; 70 percent of the dead are women and children. Half of Gaza has been destroyed; a third beyond reconstruction. Most of its 28 hospitals have closed down. Israel wins the Gaza war. What happens after that? Nobody knows.

Meanwhile, most of the world has realized, rather late in the day, it is done with inflation.

IMF forecasts the world’s inflation (or the rate of increase in global prices) to drop sharply to 6.9 percent in 2023 from 8.7 percent in 2022. Global inflation is forecast to decline steadily, from 8.7 percent in 2022 to 6.9 percent in 2023 and further to 5.8 percent in 2024, due to tighter monetary policy and lower international commodity prices.

In the Philippines, the government says the average rate of increase in consumer prices settle at 6.0 percent.

“The inflation rate is expected to return to the target range of 2.0 to 4.0 percent in 2024 until 2028,” says an update of the Development Budget Coordinating Committee (DBCC).

DBCC assumes crude at $82 to $85 per barrel for 2024, decreasing to as low as $65 per barrel in 2023-28, “as the latest futures prices and forecasts suggest falling global crude oil prices over the medium term.”

The US dollar will buy P55.50 to P56 in 2023, and P55-P58 during 2024 to 2028, implying a mini-devaluation of 4.5 percent, from P55.50 in 2023 to P58 before 2028. Not bad. “The peso will continue to be supported by structural foreign exchange inflows, narrower current account deficit projections and ample foreign exchange reserves,” says the DBCC’s arcane language.

Imports this year will decline 3 percent, implying a slight economic slowdown, because of reduced importations of raw materials, equipment and consumer goods.

In 2024, imports recover, rising 7 percent. Exports will grow, says DBCC, “supported mainly by the upturn in demand for semiconductors, while goods imports are expected to be propped up by infrastructure investments and increased domestic production capacity. Meanwhile, for 2025 to 2028, goods exports and imports growth rates are expected to return to their pre-pandemic levels of 6.0 percent and 8.0 percent, respectively, reflecting the anticipated increase in demand and trade activities globally and domestically.”

In any case, even if the whole world goes to war, I do not expect the Philippines to go into extended economic slump or depression.

The Philippines has $100-billion reserves, worth nine months of imports. The savings rate is 21 percent of GDP, equivalent to P4.2 trillion.

Our banks have P5.3 trillion in idle deposits. If government cracks its whip, P5.3 trillion can energize one million small and medium businesses badly in need of capital. SMEs provide 30 million jobs.

Finally, even if a recession comes, our young won’t notice it. They won’t be outraged. Why? They are the most stupid young people on earth, per the Program for International Student Assessment (PISA).

Our 15-year-olds know only half of what young Singaporeans know in math, reading and science; and only 70 percent of what an average teener in the world knows.

Our 15-year-olds cannot count beyond 20. They cannot read. They don’t know science. Even after attending public school for 8 to 10 years.

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