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According to Former Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa Guinigundo, the Philippines must be cautiously optimistic about the sentiments of some economic managers who see a resurgence in the economy in the next years as several factors may affect these projections.
For instance, the Asia Development Bank (ADB), in its ADB Outlook 2021, said that the country has shown incredible resilience despite the ongoing threat of the virus, and shall see positive growth for the next two years. This is despite the negative growth the Philippines experienced in the past two years.
In this last part of the interview, we talk about the forecasts for the Philippine economy, the unemployment rate, and the issues and challenges that the next administration must address swiftly, and in the long term.
The interview has been edited for length and clarity.
What is the economic growth forecast for the Philippines?
The Development Budget Coordinating Committee (DBCC) of the Philippine government, the government agency that allows both monetary and fiscal authorities to coordinate, has projected a seven to nine percent growth in 2022, and six to seven percent in 2023 and 2024. It is important to clarify that this forecast is premised on a full reopening of the Philippine economy.
But there are still uncertainties–economic scarring, the possible unwinding of policy support, and of course, the uncertainty of COVID-19. That is a linear projection in the sense that, should any of these three start to become a problem or pose a problem to achieving those targets, then the DBCC will have to redraw its forecasts.
With the expected growth, what could directly affect this?
That will depend, to a large extent, on how the government will be able to achieve a more massive rollout of vaccines, even booster shots. And of course, issues about oil prices and possible disruption of the value chain, are important assumptions in those growth projections.
Should the world see a prolonged threat from COVID-19, overseas Filipino workers, who account for 10 percent of the GDP, could have their livelihoods put in jeopardy and be forced to return home. How would this impact the economy, and what should the new government do to mitigate this?
While the pandemic has been quite prolonged, the impact on overseas employment in the Philippines has been manageable.
In 2019, before the pandemic, our cash remittance stood at $30.1 billion. At the height of the pandemic in 2020, the level inched down to $29.9 billion. And last year, we managed to grow to $31.4 billion. So, the impact was quite manageable.
The importance of cash remittances of our OFWs cannot be overemphasized. It is these cash remittances that provide support to domestic consumption, and consumption is around 70 percent of our GDP. So, 70 percent of growth is driven partly by cash remittances from overseas. Now, should this COVID-19 even becomes more prolonged, and should more Filipinos are asked to repatriate themselves to the Philippines, there will be some impact but because the Filipinos are everywhere, there are steps to counter those isolated instances.
The new government should be able to support our OFWs by way of providing financial support to them when they return. And it has been done in the last few years. Second, the government should also continue the current policy of providing support to business enterprises started by some of our overseas workers. And OWWA–the Overseas Workers Welfare Administration–has been providing that kind of support. Thirdly, the government should also continue the policy of providing scholarships and training not only to the returning residents for retooling purposes but also to their children and their families.
What is the current unemployment rate of the Philippines, and what should the new government do to resolve this?
Unemployment was most severe in the last two years of the pandemic because it reached double-digits at some point. The latest number is actually an improvement over the last period of November 2020.
November 2020 unemployment was 16.6 percent, and December at 16.5 percent. We cannot overemphasize the importance of deducing unemployment because when people lose their jobs, they also lose their income. So poverty worsens and even inequality also deteriorates. So, the new government should make sure that the pandemic is neutralized to help open up fully the Philippine economy. That will create jobs, that will create more income for our people. It is when we restructure the economy, support manufacturing, agriculture can we ensure economic recovery and reopening of the Philippine economy.
Will a change in leadership disrupt the continuity of financial policy?
The continuity of financial policy will depend, to a large extent, on who wins the presidency in May 2022.
For monetary and banking policies, we can be assured that the BSP will uphold its independence and fiscal autonomy. Both the Constitution and its charter guarantee and mandate that to the Central Bank. On the part of our fiscal policy, the continuity of financial policy is assured because everyone knows that those policies have made a difference in ensuring the sustainability and inclusivity of economic growth.
Based on these two considerations, we can be sure that the continuity of financial policy is assured. It will be further assured if the winning candidate is committed to good governance, a good economy, and good politics.
What will foreign investors be focusing on, and what would be their concerns, if there are any, with the new administration?
Foreign investors will be focusing on the new government’s commitment to good governance, integrity, continuity of good public policy, and a good market-friendly political and economic environment.
Aside from these factors, foreign investors will be looking at the concrete plans of the new government on how to bring down our fiscal deficit to GDP ratio, and our debt levels to GDP ratio. They want a concrete plan of ensuring that our fiscal situation and our debt situation are sustainable.
How have the liberalization efforts (Retail Liberalization Law, Foreign Investment Act, Public Services Act) and tax reforms of the Duterte administration impacted the economy?
It is important that liberalization efforts are sustained.
Liberalization can range from banking, retail, importation, and all aspects of the economy. That is very important because competitive forces are unleashed when you allow foreign investors to come in and invest in different sectors of the economy. Then, we get better services and better products. And I’m sure we will be seeing fewer issues with interconnectivity, low signal, or no signal at all, and that will translate into better delivery of services and products to the consuming public.
Do you think the new administration will look to continue this direction?
The new administration, depending on who wins the May 2022 elections, will also be committed to sustaining these liberalization efforts because nobody among them has raised issues about liberalization and the need for more competition. They have seen the value, the importance of encouraging competitive forces in the economy. They will result in better products and better services for the Filipino people.
What are other key issues the next administration needs to address?
The challenges to the new government are formidable.
One, it should be able to come up with a concrete solution to the pandemic problem. Vaccination, more massive vaccination, stronger diagnostics, and stronger and more accessible therapies for those who are infected with the virus. The second is a rollout of the commitment of the new government to good governance. The principles of transparency and accountability. Thirdly is a desideratum, a manifesto of his/her commitment to economic restructuring, a restructuring program that will result in greater empowerment of both big, medium, small, and micro-enterprises. An economic environment that is more competitive and more contestable markets. Fourthly, about a plan with respect to the political system. What do we do with dynasties, what do we do with political, or qualifications of candidates?
And then, of course, we need also to have this new government produce a plan that will address the issue of climate change and the environment. In other words, this SDG goal. And then, of course, issues about the marginalized sector, how do we address the social issues of poverty and inequality? These are issues that have to be addressed and have to be resolved not only in the next six years but also beyond. That’s what a good government should do.
Marvin Joseph Ang is a news and creative writer who follows developments in politics, democracy, and popular culture. He advocates for a free press and national democracy. The views expressed are his own.