We have a fairly strong economy, and our growth at more than 6 percent remains one of the fastest in the world. However, soaring crude oil prices, the general strength of the US dollar, rising interest rates and the currency crisis in several countries now serve as external threats to emerging markets like the Philippines.
The World Bank considerable risks to its above 6.5-percent growth forecast for the Philippines this year, amid rising global uncertainty due to trade tensions between the US and China as well as the rising interest rates in the US. “This could raise external financing cost and further weaken the peso,” it said.
The Philippine economy, however, is quite strong to be affected by a currency crisis, given its ample foreign exchange reserves of over $75 billion. World Bank economist Birgit Hansl said “the Philippines is fairly resilient against capital outflows compared to many of its neighbors in the East Asia Region” because “it has large foreign reserves, flexible exchange-rate, low public debt, and robust remittance inflows.”
While I believe that we have robust fundamentals to shield us from another global economic crunch, we need a coordinated approach, like rowing the boat together toward the same direction, so as not to rock the same boat.
Inflation likely peaked to 6.7 percent in September, mainly because of higher commodity prices, which could have been better managed if all agencies of the government were working in line with the President’s direction.
The last thing we need, while sailing in rough waters caused by these external challenges, is to be unsettled. Government agencies would do well to heed the President’s direction and avoid drastic changes that may cause two things: increase prices and put people out of work.
I suggest that the Cabinet convene a meeting among all government agencies, so that everybody is in tune with the goals of keeping prices manageable and generating more jobs. The National Food Authority, for example, should make sure that the country has adequate rice supply all the time.
In the pursuit of the mandate given to them, government managers should carefully weigh their action and determine if a decision will contribute to the goals. Will this help create employment? Will this make prices of commodities more affordable? If not, we should delay such action at this point, or at least until the situation stabilizes.
Our bureaucrats and government managers should avoid taking any drastic action that will cause unemployment or increase prices. Let our ship run steadily until the storm passes. Unless urgent, decisions could be put off until the global financial turmoil is over.
This is not to say we are in trouble. Right now, our ship is steady, but too many oars paddling in different directions could rock the vessel.
I believe that the government’s economic team has a good sense of the situation. On the day the Philippine Statistics Authority reported that inflation rate hit 6.7 percent in September, the economic team assured everyone that “we are working swiftly to temper the rise in the prices of goods and offer relief to those most affected.”
“We remain committed to our goal of ensuring price stability, along with our overarching aim of translating sustained broad-based economic growth to comfortable lives for everyone,” the economic managers said in a joint statement.
A welcome news is that inflation is predicted to taper off by year-end and return to the target range of 2 percent to 4 percent early next year. The passage of the Agricultural Tariffication Act is also expected to stabilize the price of rice and improve the competitiveness of Filipino farmers in the long-term.
“Despite risks and uncertainties in the global economy, the Philippines’ macroeconomic fundamentals remain robust and resilient enough to weather external shocks. And our work for the people never ends: We continue to stay on course in realizing our medium- and long-term development goals for the country,” the economic team said.
Several multilateral lenders share such optimism. In its latest Philippines Economic Update, the World Bank said it expects the Philippines to grow 6.5 percent in 2018, 6.7 percent in 2019 and 6.6 percent in 2020, despite the rising global uncertainty and inflationary pressures.
That, I believe, is a vote of confidence in the Philippine economy. While these figures are lower than the government’s target range of 7 percent to 8 percent, I would welcome a 6-percent growth given the current global uncertainties. We just need to relax and calm our nerves until the storm is over.
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This piece first came out in Business Mirror on Oct. 16, 2018 under the column “The Entrepreneur.” For comments/feedback e-mail to: mbv.secretariat@gmail.com or visitwww.mannyvillar.com.ph./PN
