Three economic scenarios

Summer’s just around the corner and it’s increasingly becoming scorchingly hot as if we’re all burning with high fever; but this sweltering heat is nothing compared to tensions in politics that we’ve been seeing over the past several months.

As we approach the end of the first quarter, it’s perhaps a good time to check how the economy is doing amid all the political noise.

We all know that at the start of the year, we were all caught by surprise by how far the so-called people’s initiative to change the Charter intensified, seemingly in the wink of an eye. This then revived debates on how to change our 1987 Constitution.

The House of Representatives and the Senate were caught up in conflict on how to go about such changes, with members of each chamber pointing fingers on which route to take. The issue was whether the changes would constitute amending just the economic provisions or a total change in the Charter. Fast forward to today. As The STAR reported recently, the House of Representatives approved on second reading Resolution of Both Houses 7 (RBH7) amending restrictive economic provisions in the 1987 Constitution, just before Congress goes on a Holy Week break.

“Administration lawmakers overwhelmingly endorsed through a voice vote the economic Charter change ostensibly aimed at relaxing foreign ownership restrictions in public utilities, education and advertising.

“Rep. Rufus Rodriguez, chairman of the House committee on constitutional amendments, suggested that in light of the Philippines’ rift with China over the West Philippine Sea, the government can ‘exclude Chinese and other risky investors in the economic Charter amendment enabling law.’”

Economic Cha-cha indeed, plus, as Rodriguez mentioned, there’s also the ongoing and seemingly escalating tensions between the Philippines and China.

How do we really solve this problem? It doesn’t help that some sectors in society are fanning the flames, seemingly wanting the conflict to worsen. I’ve said it before, I don’t think we can have a lasting solution to this problem now but I hope both Manila and Beijing can come up with better terms on how to really move forward toward de-escalation, to the extent possible.

Just the same, the tensions have obviously been an unnecessary distraction. The Marcos administration could otherwise be focusing on more important measures to help push the economy onward and forward, stronger and better.

Another distraction is Apollo Quiboloy, as our lawmakers are divided over the issue. One group of senators is defending the pastor, while another group wants Quiboloy to face the charges against him, including sexual offenses.

But amid all the noise, the question begs to be asked – how is the economy doing?

In a report, McKinsey & Co. presented three scenarios:

“The Philippines ended 2023 on a high note, being the fastest growing economy across Southeast Asia with a growth rate of 5.6 percent – just shy of the government’s target of 6.0 to 7.0 percent. Should projections hold, the Philippines is expected to, once again, show significant growth in 2024, demonstrating its resilience despite various global economic pressures.”

Indeed, the good news is that last year’s economic expansion was better than that of our neighbors, as McKinsey pointed out, and if all goes well, the economy can again record significant growth this year.

But McKinsey also points out a slower growth scenario if challenging conditions persist.

“Having grown faster than other economies in Southeast Asia in 2023 to end the year with 5.6 percent growth, the Philippines can expect a similarly healthy growth outlook for 2024.

“Based on our analysis, there are three potential scenarios for the country’s growth.

Slower growth “Slower growth: The first scenario projects gross domestic product (GDP) growth of 4.8 percent if there are challenging conditions – such as declining trade and accelerated inflation – which could keep key policy rates high at about 6.5 percent and dampen private consumption, leading to slower long-term growth.

Soft landing “Soft landing: The second scenario projects GDP growth of 5.2 percent if inflation moderates and global conditions turn out to be largely favorable due to a stable investment environment and regional trade demand.

Accelerated growth

“Accelerated growth: In the third scenario, GDP growth is projected to reach 6.1 percent if inflation slows and public policies accommodate aspects such as loosening key policy rates and offering incentive programs to boost productivity.”

Best scenario

A 6.1 percent growth is already the best scenario for the economy for McKinsey but we could do better than that. How? By strengthening our domestic industries, improving food supply bottlenecks to bring down prices and jumpstarting more infrastructure projects to create jobs.

The goal should be for the economy to sustain stronger and faster growth so that it can trickle down to the wider population.

The political noise, on the other hand, may be unnecessary distractions which could also spook investors.

We don’t really need dark clouds to blur our path toward growth.

As it is now, ordinary Filipinos are grappling with still high prices of food, with inflation hitting 3.4 percent in February and snapping four months of decline.

Against this backdrop, I fervently hope things get better – sooner than later.

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