(Part 4)

Despite the lingering weaknesses of our still fragile democracy, the Philippines is no longer known in international circles as “the sick man of Asia”. Since the turn of the third millennium, as we have seen in previous articles in this series, the Philippines has consistently featured on the list of the most promising emerging markets, “breakout” nations and the next generation of NPIs. (newly industrialized countries). These positive assessments of the Philippines’ economic future have continued to pour in over the past four years, even as the Philippine political climate has darkened due to the perception by some outside observers that the current political leadership leaves much to be desired in because of the lack of respect. for human rights, incompetence in the management of relations with China and, more recently, tolerance of corruption among presidential cronies.

For example, just before the outbreak of the pandemic in early 2020, the Oxford Economics group published in November 2019 a list identifying 10 countries as the major emerging markets that will dominate the global economy over the next decade. Among the 10, there are six countries in the Indo-Pacific region that will surely lead the world economy in terms of economic growth for many decades after the pandemic is reasonably brought under control. The classification is as follows: 1.) India; 2.) the Philippines; 3.) Indonesia; 4.) China; 5.) Malaysia; 6.) Turkey; 7.) Thailand; 8.) Chile; 9.) Poland, and, 10.) South Africa. The ranking took into account factors other than the GDP numbers and also took into account the availability of finance and the growth of the workforce, in which the Philippines ranks very high due to our young population, growing and English speaking.

The brief commentary on the report summary published by Oxford Economics gives the following reasons for the second highest ranking assigned to the Philippines: with enormous economic potential. The Philippines is expected to experience the largest increase in its workforce among the top 10, alongside its GDP growth of 5.3%. This means it will be one of the fastest growing economies in the world sooner rather than later. ”

India got the top spot because of “its massive 6.5% GDP growth, and it is likely to one day become the world’s largest economy, not just in emerging markets.” The country has a huge population and, when fully utilized, it will be an unwavering force in world markets. “In fact, within five years, it is quite possible that the Indian population will exceed that of China since the latter is suffering from” demographic suicide “, thanks to the one-child policy imposed by its government for many years. many years. Despite recent efforts by the Chinese government to encourage couples to have more children, the result has been disheartening. This is no surprise since the lesson from Singapore is that once the contraceptive mindset has been ingrained in the minds of women, no incentive works to encourage them to have more children. This rapid aging that China is already experiencing, which will intensify in the years to come, is one of the major reasons why China only occupies fourth place in the Oxford Economics rankings.

Oxford Economics’ reference to the largest increase in the labor force will remind us that the two most powerful growth engines before and after the pandemic are the remittances of some 10 million Filipino workers abroad (OFW). and the huge dollar revenues of the BPO- IT sector. These two countries represent around 12 to 15% of the Philippine GDP. They would not be possible without our young, growing, English-speaking population. During the pandemic, these are the two sectors that barely suffered from the global collapse. Despite the return of around 800,000 OFWs who were made redundant from their overseas work (especially in the Middle East), OFW remittances in 2020 only declined by -0.3% while the whole economy suffered from a drop in GDP of -9.1%. In the first six months of 2021, OFW’s remittances grew by an average of 6%. As the whole world recovers, the demand for Filipino workers in developed countries, especially for healthcare workers and caregivers as well as service workers in the hospitality industry, will surely increase even more. In addition, the young and growing population (already at the level of 110 million in 2020 and growing) will be a solid basis for high growth, given that domestic consumption accounts for over 70% of GDP. The Philippines, like China and Indonesia, will increasingly depend on the domestic market for strong GDP growth, not exports.

In addition to Oxford Economics ‘very positive assessment of the Philippines’ long-term economic outlook, another UK think tank, the Center for Economics and Business Research (CEBR), also presented the Philippines in a very good day like the end of December 2020 (when COVID-19 was also raging around the world). In a world economic forecast for 193 countries through 2035, the CEBR predicted that the Philippines would improve by 10 places in the World Economic League Table rankings. Ranked 32 in 2020, the Philippines is expected to rank 22 in 2035, one of the most improved countries among the 193 countries included in the study. The CEBR predicts that over the next five years, the annual GDP growth rate is expected to reach an average of 6.7%. Between 2026 and 2035, the CEBR predicts that the average rate of GDP growth will decline slightly to 6.5% per year. Over the next 15 years, the think tank predicts the Philippines will rise rapidly in the World Economic League Table rankings, from 32^sd position in 2020 at 22^sd in 2035. Here again, we have a completely independent institution that makes optimistic long-term forecasts for the Philippine economy.

The longer-term forecast recently was that of Hongkong and Shanghai Banking Corp. Ltd. In a forecast to 2050, the Philippines has been named as the third country with the fastest growing GDP after China and India. In a review of the report in that document dated November 25, 2014, the Philippine economy was to be the 16^e by 2050, surpassing powerful economies like Australia, Indonesia, Egypt, Malaysia, Thailand, Netherlands, Poland, Iran, Switzerland and Pakistan. Among the top 30 countries included in the forecast, the Philippines would see the biggest improvement from 2012 to 2050, an impressive jump of +27 in the rankings.

According to HSBC, the country’s exports are expected to quintuple by 2050, assuming a growth trajectory that remains among the highest in Asia, and reinforced by regional integration. Like the rest of the countries in the Asia-Pacific region, the Philippines will benefit from agreements such as the Regional Comprehensive Economic Partnership (RCEP) which ensures that the 15 RCEP economies will continue to be open to each other in terms of trade and investment, avoid alter-globalization trends observed in certain advanced countries such as the America First focus in the United States and Brexit in the United Kingdom. An opportunity for the Philippines, as well as for the other nine members of the ASEAN Economic Community (AEC), is what HSBC sees in the share of intra-Asian exports rising to 27% of the world total from 17%. in 2012, based on “agile networks of multinationals that create their own specialized value chains” which will also increase levels of prosperity in the countries in which they operate. The expansion of trade through 2050 will represent a “third wave “of globalization, after similar growth spurts in the decades leading up to 1913 and the post-war period. It is therefore imperative for the Philippines to improve the ease of doing business so that it can compete with other ASEAN economies such as Vietnam and Indonesia by attracting factories leaving China to settle in the Philippines.

The HSBC report said that in the Philippines, “investments in infrastructure, such as ports, airports and better road networks, will drive prices down. There have also been policy changes such as rent changes to the Coasting Trade Act. There will certainly be great improvements in the flow of goods and people as the infrastructure and business environment improves. The report also added that one of the mainstays of the Philippine economy, the business process outsourcing industry, will continue to ride the demographic wave “as Filipinos are one of the youngest (the median age is 24) in this part of the globe – coupled with improving literacy.

In many ways, as we observed in the first few articles in this series, what HSBC prognosticated on the Philippines has actually been accomplished in the last five years of the Duterte administration, especially those relating to the Philippines. to the significant improvement of infrastructure through the Build, Build, Build program. What remains to be done is to reduce the restrictions on foreign direct investment that can still be delivered before the end of the current administration through the three bills pending in Congress, namely the Services Act. government, retail liberalization and the foreign investment law. . As a member of the Constitutional Commission that drafted the 1987 Philippine Constitution, I still have hope that in the next administration, the Philippine Congress can further amend the restrictive provisions of our Constitution against FDI, especially in those areas. telecommunications, media, advertising and higher education. . m

To be continued.

Bernardo M. Villegas holds a doctorate. in Economics from Harvard, is Professor Emeritus at the University of Asia and the Pacific and Visiting Professor at IESE Business School in Barcelona, ​​Spain. He was a member of the Constitutional Commission from 1986.

bernardo.villegas@ uap.asia