Challenges and Opportunities
I want to congratulate the set of newly elected officials who will guide our nation for the next three to six years.
Challenges and opportunities await those who received fresh mandate from the electorate to serve the government and our people. I am confident that they are up to the task of serving the interest of the majority of our population, which, at 110 million, is now one of the largest in the world.
The incoming administration may have an easier task of managing the pandemic because much of the workload has been accomplished by President Rodrigo Duterte and his Cabinet. But ending the pandemic remains a challenge because it is a global crisis that will continue to affect all of us as part of the international community.
I hope that the massive vaccination will continue, including the administration of second booster shots, to protect our people from a possible surge of infections. The Department of Health has detected the local transmission of Omicron subvariant BA.2.12.1, which authorities believe is about 20 percent more transmissible than the BA.2.
The good news is that the situation remains manageable, despite the hectic election period that saw huge political gatherings and rallies. OCTA Research, a group that closely watches the Covid-19 situation, noted no sustained increase in cases following the May 9 polls.
Our numbers of active Covid-19 cases have hovered around the 2,000 mark last week, while daily new cases averaged only 160, which were among the lowest since the pandemic started in early 2020.
On the economic front, I am confident the next administration will address the challenges that lie ahead. Among these are the accelerating inflation rate, widening budget deficit and rising public debt. These challenges were actually caused by the health crisis and the conflict between Ukraine and Russia.
It will require a delicate balancing act to manage our fiscal affairs. On one hand, we have to sustain public spending to build infrastructure and support our economic recovery. On the other, we need to prevent the widening of the budget deficit to retain our investment-grade sovereign ratings.
The key is to raise more revenues by enhancing our collection efficiency and allowing the tax reforms passed by Congress to work over time.
On inflation, the Bangko Sentral ng Pilipinas started raising interest rates this year, beginning with a 25-basis-point adjustment in overnight borrowing rate on Thursday, to temper the demand for money, which unfortunately may affect our economic growth assumptions. I just hope that bank interest rates will remain affordable to provide businesses and households with incentives to invest and spend in support of the economic recovery.
Following the remarkable 8.3-percent expansion in the first quarter of 2022, our gross domestic product is expected to sustain its growth in the coming quarters. The full impact of the recovery will be more pronounced in the second quarter, when we really started to ramp up business activities. The recovery is supported by election-related spending that usually boosts the growth of several sectors, such as fast-food restaurants, printing, media, transportation and other services.
Many economists upgraded their 2022 growth forecasts for the Philippines in line with the government’s target of 7 percent to 9 percent after the first-quarter performance was released.
To sustain this growth traction, it is up to the next administration to address the challenges I mentioned above and take advantage of the opportunities that are available to us, including a large pool of young graduates who are prepared and eager to join the labor force.
Unlike other countries that now realize the problem of low population growth rate, the Philippines continues to enjoy the “demographic sweet spot” that led to the booming IT and business process outsourcing industry and other service exports. Remittances continue to contribute to the economy, increasing 2.4 percent in the first quarter of 2022 to $7.77 billion from $7.59 billion in the same period last year. I hope that aside from our labor exports, more local industries will benefit from this demographic dividend, including tourism and manufacturing.
Other opportunities that await the next administration include the completion of major infrastructure projects that will benefit other parts of the country. These will further unleash the economic potential of more areas in Luzon, including Subic and Clark, and unlock land values in Visayas and Mindanao.
We should also take advantage of various trade agreements we have with our Asean, East Asian, Asia-Pacific and European partners, not only to increase our exports but also to allow imports that will help us stabilize inflation.
These trade pacts will enable us to bring more of our local bumper harvests such as mangoes, bananas, pineapples and coconut oil to our trading partners. At the same time, the trade agreements will allow us to bring in food items such as rice and wheat at low tariffs to ensure food security for our large population.
As much as we would like to be self-sufficient in rice, we have to accept the fact that our population has doubled since 1985, while our rice production area remained the same or even dwindled.
Nonetheless, I am upbeat that our next government leaders will fully take advantage of these economic opportunities that will help improve the lives of the Filipinos over the coming years.