Late last week, the National Economic Development Authority and the Philippine Statistics Authority announced and published that the Philippine economy grew at its fastest in the first quarter of 2016 at 6.9 percent. The quarters Gross Domestic product growth compared to that of the same quarter last year which increased by 5.2 percent, makes this the fastest increase in economic output in a quarter in the last three years. Highlighted in this report was the strong investment component, from both the public and private sector, even as the consumption portion still accounting for the large part of the growth.
Shown also was the comparative growth of the GDP over the last 16 years which showed that the country have been in a growth path for some time, even if it had slightly slowed down in some years. For the first time in 27 years we outpaced China's GDP 6.7 percent growth in a quarter, and left behind Vietnam's 5.7 percent, Indonesia's 5.5 percent, Malaysia's 4.9 percent, Thailand's 3.2 percent and Singapore's 1.8 percent. We have clearly gotten out of our "boom and bust" economic growth cycle and no longer the sick economy of Asia. So what is ailing our economy and our country that we are still behind some of our Asian neighbors in terms of the economic wellbeing of our people?
Going into the details of the macro-economic figures, in spite of the GDP growth, the positive balance of payments position, the lower fiscal deficit, the lower debt to GDP ratio, strong inward remittances, favorable foreign exchange rate, and others, we have been slow in reducing our unemployment rate. This is the main drag in our economy and is responsible for the poverty level that is still hovering at 20 percent. We have slightly reduced this poverty level from the high of 29 percent but the 6 to 7 percent economic growth have not cascaded down fast enough to the lower classes to improve their standard of living. While it can be argued that it would take more than six years at this growth rate for the economy to have a significant impact on the poverty levels, I believe the lack of growth in the manufacturing sector is the main culprit. It took China 11 years with their economy growing at 10 to 12 percent per year, to reduce the poverty incidence by one third by being the largest supplier of manufactured goods to the world, with a lot of push from an authoritarian government. It will take the Philippines 20 years to reduce its poverty level to 11 percent in a democratic environment.
Other details of our GDP figures in 2015 and 2016 shows that agriculture which 27 percent of our labor force and population did not contribute to the GDP growth. It contributed less than 2 percent in 2015 and was even negative 4.5 percent in the first quarter of 2016.
Weather conditions like "El Niño" and "La Niña" have a lot to do with this situation, but we really have to put our act together on agriculture output. Services and industry were the drivers in the supply side of the GDP, and consumption, public and private investments fuelled the demand side of the GDP. At the rate that the economy is growing especially with the election spending in the second quarter, the whole-year GDP would likely grow at over 7 percent which would set another record growth for the Philippines and in Asia and the world, especially at this time when the developed economies are struggling with low growth. This is very possible given the large increases in the revenues and profitability of the top 100 and stock exchange listed companies. This high profitability is also making these companies budget for large capital expenditures for the coming years. The Ayala, the Aboitiz, the SM Group, the Lucio Tan Group, Megaworld, Gokongwei, Jolibee and others are committed to multibillion CAPEX budgets for 2016 and 2017. This makes the stock market also buoyant with prices and volume as the profitability of these companies makes the price to earnings multiples realistic.
In all 47 years as a professional manager and a business person in many industries I have never seen the Philippine economy so strong and so full of potential. It would take a major bungle for the incoming administration to make a very good economic environment and prospects a disaster. Hopefully they will do a good job, by putting in the right policies and people.
A John Hopkins University professor Steve H. Hanke came up with a "Misery Index" to measure the misery level of 89 countries. The Index is composed of: Annual inflation rate +Ave. lending rate+ unemployment - year on year growth per capita. In 2015 Index Venezuela was #1 as the most miserable country to live, followed by Iran #2, Serbia #3, Argentina #4, Jamaica #5, and Egypt #6. Singapore and Japan at #87 and #89 respectively were the least miserable countries and even beat the US and other European countries. The Philippines was at #67 in the lowest third quartile was a good and decent place to live in 2015 and hopefully in the years to come.