Growth Amid a Global Recession
Growth in the Philippines and this part of the world and the feared recession in the West are a clear case of juxtaposition. The pessimists will echo the dire warnings of market analysts that the world economy is about to enter a period of recession, while the optimists will look at the glass as half full.
The optimist in me tells me that the Philippines will sustain its economic growth this year and the next. Moping about the inevitable recession in the West will not get things going. For sure, the forthcoming recession in the US and Europe will make a dent on the local economy, but I believe we have plenty of room to grow.
I will not personally dismiss the predictions of noted world economists. I actually agree with them. The series of interest rate hikes being implemented by the Federal Reserve Board and the European central banks will dampen demand and consumer spending by way of higher cost of borrowing. But they are a necessary evil to combat surging inflation.
European Central Bank President Christine Lagarde last week was clear on her message about the next ECB actions—it will keep increasing interest rates even if Europe’s economy slows down or enters a recession. In her own words, the ECB plans “to raise interest rates further over the next several meetings to dampen demand and guard against the risk of a persistent upward shift in inflation expectations.”
The head of the World Trade Organization, Director-General Ngozi Okonjo-Iweala, is more straightforward on her assessment. To her, the world is now heading towards a global recession. Russia’s invasion of Ukraine, soaring energy prices, supply chain disruptions and the Covid-19 aftermath led to the creation of a perfect storm in the form of global recession.
The brewing economic storm in Western economies, however, is in stark contrast to developments and the prognosis in the Asian front. In the Philippines and most of Asia, regional economists are talking about economic growth.
Vietnam reported last week that its economy expanded by over 13 percent in the third quarter year-on-year, making it the fastest growing in the continent. Vietnam was one of the economies hardest-hit by Covid-19, with strict lockdowns hampering industrial production. The economy of our Southeast Asian neighbor grew 8.83 percent in the first nine months of 2022 after weathering the pandemic.
The fate of the economies in Asia is certainly opposite to what is about to happen in Europe and the US. The inflation rate is also high in Asian economies but they are nowhere close to reaching the double-digit levels. And multilateral funding institutions like the International Monetary Fund and the World Bank are painting a better economic picture of Asia.
The IMF last week provided a bullish outlook on the Philippines, presumably premised on Manila’s strong economic fundamentals and the more business-friendly policies that the Marcos administration is adopting.
The IMF now expects the Philippine economy to expand faster at 6.5 percent this year from the actual 5.7-percent growth in 2021. The economy grew by 7.8 percent in the first half, after expanding 8.2 percent and 7.4 percent in the first and second quarters, respectively.
The fund noted that the Philippines emerged successfully from one of the world’s strictest pandemic lockdowns, citing sustained reforms and disciplined macroeconomic policies that contained financial vulnerabilities and mitigated the hardships faced by the poor. The IMF report, to me, is an endorsement of what the Marcos administration is doing to bring back full economic recovery.
The IMF assessment comes on the heels of a similar favorable report from the Asian Development Bank. The ADB also upgraded its 2022 growth forecast for the Philippines to 6.5 percent from an earlier estimate of 6 percent after that robust 7.8-percent expansion in the first half of the year.
The impending recession at the other side of the world could be a blessing in disguise for the Philippines. And I believe that foreign investors are noticing our positive growth story.
For one, nine foreign companies, per the business news I read last week, are interested in putting up textile or garment factories in the Philippines that will help increase the country’s exports by more than $500 million a year. These garment investors from Cambodia, India and Vietnam obviously have seen the economic opportunities here.
I will not be surprised if more foreign investors place their bet on the Philippines soon, especially after the recent successful working visit of President Ferdinand Marcos Jr. to the US. Ours is not a recession story—it is still about economic expansion.