Why we need to grow by 8-9% yearly

The Development Budget Coordination Committee (DBCC) is considering revising the Philippines’ annual growth target until 2024, from 6.5% to 7.5%, down to 6-7%. I think this is a practical adjustment because the global and regional economic environment is deteriorating, not improving, as shown by the generally lower growth of countries in 2023 compared to 2022, and with high inflation persisting in many countries this year.

I updated my table monitoring the GDP growth of major economies in the world, those with a GDP of at least $700 billion in purchasing power parity (PPP) values projected for 2023. Several countries were not included because there was either no GDP data or it was incomplete. These countries are Bangladesh, Pakistan, and the United Arab Emirates.

Some countries revised their quarterly growth data for 2023.

Still, the Philippines remained the third fastest growing country after India and Iran. And our growth of 5.6% in 2023 is high over a high base in 2022.

Practically all European economies except Turkey and Spain were crawling at 0.1% to 1.5% growth. Some were contracting — Germany and Ireland (see Table 1).

The good thing for us is that our economic growth rate is faster than that of many other countries in the world. The bad thing is that our economic base, our GDP size, is still “small.” Our projected GDP size of $1.28 trillion in 2023 is smaller than those of Thailand, Vietnam, and Taiwan and they have smaller populations than we do.

We actually need to grow 8-9% yearly for at least a decade to drastically expand our economy — our roads and physical infrastructure, both toll roads and rail, our power supply and electricity generation capacity, and so on.

Our frequent heavy traffic is an indicator that there are not enough roads despite the expansion of new toll roads. Our high electricity prices are an indicator that the power supply is not enough despite the favoritism in fiscal incentives and priority dispatch for intermittent renewables.

Assuming we can grow at 8.5% yearly from 2024-2034, the Philippines’ GDP size at PPP values would rise from $1.28 trillion in 2023 to $3.14 trillion in 2032, or at the level of Italy or South Korea in 2023.

I went to Hong Kong last January, then Toronto, Canada last week, and I observed their road infrastructures. I estimate that it would take us at least 40-50 years of steady infrastructure modernization to be at their level now in 2024. Traffic congestion is an engineering problem with engineering solutions, not bureaucratic solutions like hiring thousands of “traffic enforcers.”

Engineering plus the enforcement of the rule of law. The law applies equally to unequal people. No one is exempted and no one can grant an exemption. The law should apply to both governors and governed, both administrators and administered, both government officials and ordinary people.

Here’s hoping for continued growth and prosperity for our country and our people.