PH economy on track to a growth path?

Based on the latest macro-economic data from the Philippine Statistics Authority (PSA), we could deduce that the domestic economy is back on track to a growth path. Last week, the PSA surprised everyone with a better-than-expected inflation rate in October. Based on the Consumer Price Index (CPI), which measures the overall change in consumer prices based on a representative basket of goods and services, the pace of growth in prices substantially slowed down to 4.9 percent from 6.1 percent in September. The latest inflation level was also substantially lower than the 7.7 percent in October 2022.

The inflation report was followed by another good news on the country’s gross domestic product (GDP), which is the sum total monetary or market value of all the finished goods and services produced in a country over a specific period.

PSA data showed the Philippine GDP soared to 5.9 percent in the third quarter this year from 4.3 percent in the second quarter of same year.

The two economic data got me thinking though.

If these figures are to be believed then the Philippine economy is progressing well. No doubt, the Philippines is set to become Southeast Asia’s fast growing this year.

The 5.5 percent year-to-date GDP puts the Philippines ahead that of China (5.2 percent), Indonesia (5.1 percent), Vietnam (4.2 percent), Malaysia (3.9 percent), and Singapore (0.5 percent).

Nonetheless, the country’s lower inflation rate in October has yet to be felt by consumers. The growth in price increases may have slowed down, but prices are still high. In fact, several manufacturers of basic goods and commodities have pending petitions with the Department of Trade and Industry for price adjustments.

Most central banks, including our very own Bangko Sentral ng Pilipinas, are now using inflation targeting in their policy setting or in determining bank’s interest rate when they approve loans.

When inflation rate kicks up, the central bank is likely to raise interest rates to slow the economy and bring down prices. Higher interest discourages spending because it makes more expensive to borrow or take up loans or carry a balance on a credit card.

The idea is when spending declines, demand will fall and, eventually, so will the price of everyday goods.

But when inflation is too low, central bank typically lowers interest rates to stimulate the economy and move inflation higher.

As such, prior to the release of the latest data, the BSP’S benchmark interest rate was already at 6.5 percent, a 16-year high.

The high interest rate has effectively slowed down bank lending significantly. A BSP report showed that big banks’ lending growth further declined to a 21-month low of 6.5 percent year-on-year in September from 7.2 percent in August.

Another crucial data to consider is the jobs report.

Based on the PSA’S Labor Force Survey, the country’s unemployment rate slightly grew to 4.5 percent in September from 4.4 percent in August. This means, more jobless Filipinos.

Also, exporters said that it is unlikely to hit the growth target this year.

In August this year, the country’s exports increased by 4.2 percent to $6.7 billion from $6.43 billion in August 2022. But on a year-to-date basis, the country’s exports decreased by 6.6 percent or a total of $47.81 billion from $51.18 billion in the same January-august period last year.

Under the Philippine Exports Development Plan (PEDP), the government revised its export revenue target to $126.8 billion by the end of 2023.

The PEDP also targets $143.3 billion in 2024; $163.6 billion in 2025; $186.7 billion in 2026; $212.1 billion in 2027; and $240.5 billion in 2028.

This means, the country has to rely more on domestic growth, and grow organically.

My skepticism over these major economic indicators was tempered by an affirmation over the weekend by credit rating agency Fitch of the Philippines’ BBB investment grade with a “stable” outlook.

Another factor that has somehow convinced me that we are finally returning to a more stable growth path was the appointment of a new agriculture secretary.

The agriculture sector will play a pivotal role to sustain our growth. We cannot rely on exports and imports in these turbulent times.

The problems in the agriculture sector are immense, not to mention a bureaucracy that is riddled with controversies from fertilizer subsidy, fish and meat imports, rice, among other inefficiencies.

Newly appointed Agriculture Secretary Francisco Tiu Laurel Jr., who hails from a family-owned fishing empire in the country, will have his hands full.

Making this particular bureaucracy work efficiently to push the country’s agriculture to progress is such a heavy yoke.

But, really fingers crossed, we all want the new secretary to deliver where all past secretaries failed.

The agriculture sector is a major pillar in our march to growth. With the still obtaining and still evolving geopolitics, the Philippines cannot rely much on global trade and supply for food.

This is an agricultural country. When agriculture contributes it rightful share, only then I can confidently say, we are on track to a growth path.