MANILA, Philippines—The Public-Private Partnership (PPP) conference was held a few days ago amid growing optimism in our country’s economy. Most economists and international financial institutions, like the Asian Development Bank and the World Bank, agree that the Philippine gross domestic product (GDP) will grow at an estimated 5.5 to 7.0 percent for 2010 (compared with an average of 4.9 percent for 2000-2009). Interestingly, the highest figure of 7.0 percent was forecasted by the International Monetary Fund while the lowest of 5.5 percent, by Fitch Ratings.
Evidence of buoyancy. I am not an economist but having been exposed to business trends for four years now—after my retirement from the judiciary—as an independent director of several listed firms, I tend to believe these bullish forecasts because I see some credible evidence of the economy’s buoyancy.
For one, most of the publicly listed conglomerates (like PLDT-Metro Pacific, SM, San Miguel, Ayala, JG Summit, Lucio Tan group, GT Capital, Lopez, Aboitiz, etc.) expect to exceed their own forecasts for the year. The major banks (Banco de Oro, Metrobank, BPI, etc.) are stable, liquid and are poised to produce record revenues and incomes.
The Philippine Stock Exchange, though comparatively small in size, is the second best performer in our region. According to Global Source Partners, our bourse gained 35 percent since January, compared to first placer Indonesia that rose 37 percent; third placer Thailand, 30 percent; fourth placer Malaysia, 15 percent; and fifth placer South Korea, 10 percent. Significantly, this stellar stock market performance is pushed by foreign buying, showing that the Philippines has once again become an investment darling.
Apart from the stock market, the real estate business is pumping up. Most big developers have sold their inventories as buyers—taking advantage of available long-term, low-interest rates—lap up both condos and subdivisions. Even motor vehicle companies are reporting record sales; aficionados of both luxury and compact models fill the showrooms.
Three critical rates. Most analysts ascribe this sterling economic growth to record-breaking remittances from overseas Filipino workers (OFWs), increased business process outsourcing (BPO) revenues, heightened expenditures in the last elections, liberal consumer spending and renewed confidence in the new national leadership.
As a non-economist, I assess the health of the economy on how three rates perform: inflation rate, interest rate and exchange rate. To lay people, the inflation rate is very important because it determines the amount of goods and services they can buy. Except for some fluctuations during floods and typhoons, the prices of food, medicine, clothing and other essentials are steady. Hence, I could enjoy eating the same food at home and bring my grandchildren to our favorite restaurants once a week, with my wife and me enjoying our senior citizen privileges.
The interest rate cuts both ways. While our retirement funds and savings earn a measly 2 to 5 percent yearly, the all-time low lending rate of 6 to 9 percent are affordable by medium and small enterprises like the ones run by our eldest daughter Len, thus enabling her to enjoy the fruits of her entrepreneurship.
The peso-dollar exchange rate is not merely stable; it in fact favors the peso, which continues to appreciate. This means that imported goods and services will be cheap. A strong peso is a hedge to petroleum and oil products, which are bought and sold in the world market in US dollars. On the other hand, a rising peso means that exporters and OFW families will get fewer pesos for the dollars remitted to them.
How about the poor? To propel the economy in the future, P-Noy is pushing for his centerpiece PPPs to develop infrastructures such as tollways, airports, piers, railways, water systems, electric power, etc. But these projects will take a few years to gestate.
The PPPs will not bear fruit today and will not feed or shelter or educate the teeming masses immediately. Yet the very poor urgently need food, employment, education and basic health services. GDP figures, economic statistics and the three rates I discussed have no significance to those who eat only once a day, or live in squalid shacks along railroad tracks, or whose children are out of school, trying to help their parents meet their daily needs by selling newspapers, scavenging garbage heaps and begging in the streets.
That is why I understand the rationale for the P21-billion Conditional Cash Transfer (CCT) program to address the immediate needs of the very poor while the main economic programs are gestating. It is easy to criticize the CCT as a dole that will encourage idleness and laziness.
However, this system has worked in other countries especially in Latin America and Africa. Cash will be given provided the recipients agree to certain conditions, like sending their children to school and getting health check-ups. The handout mentality is negated by the education, health and social benefits attached to the CCT program.
In sum, I am not saying that the Philippines is now on the road to prosperity. Not yet. To be a mini-China, the Philippines must attain consistent double-digit growth. All I am saying is that the country has found a new modest beginning. The business community is aglow with rising expectations and the government is pushing in the right direction. There is still much work to be done. But there is hope in our future.
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The Personal Website of Retired Chief Justice Panganiban 