While many sectors and economic observers in the country tried to play down if not criticize the “low” GDP growth of 6.4% in the first quarter (Q1) this year as reported by the Philippine Statistics Authority (PSA) last week, it was actually excellent growth by global standards. Why?
As of yesterday morning, I counted 29 economies that reported their Q1 2023 GDP data. The GDPs of both the Philippines and Ireland were 6.4% and these countries were in the top spot. Next was Malaysia with 5.6%. Four of the 29 economies suffered contractions: Germany -0.1%, the Czech Republic -0.2%, Taiwan -3%, Lithuania -3.7%. The United Kingdom and Singapore both had almost flat growth at 0.2% and 0.1%, respectively (see Table 1).
So, congratulations, Philippine entrepreneurs, workers, and consumers! Congratulations too to the government economic team — good job!
On the same day that the PSA released the GDP figures, the Department of Budget and Management (DBM) released a very appropriate statement titled: “Pangandaman: PH now has a dynamic domestic economy as GDP posted a 6.4% growth in Q1 2023.”
DBM Secretary Amenah F. Pangandaman was quoted as saying: “The country now has a dynamic domestic economy. This means that even if the regional and global economic environment would worsen, ours has its own momentum and own dynamism to sustain growth…. With all these data coming in, I can say that the Philippines’ 6.4% is actually outstanding. It would be excellent if it reached 7%, but 6.4, or even 6%, is already outstanding.”
This assessment is 100% correct. Why?
One, as discussed above, the Philippines (along with Ireland) was the fastest growing economy in the world in the last quarter, at least among the 29 economies.
Two, consider that the 8% growth in Q1 2022 was largely due to election-related spending. With such a high GDP base or level a year ago, a no-election Q1 2023 would have logically been below 6% and yet it grew 6.4%.
On the growth outlook, Secretary Pangandaman added in the same statement: “So, we now project 6.6-7.5% growth from the second quarter to the fourth quarter of 2023, and full-year GDP growth target of about 7.1%.”
Yes, I believe this is also a realistic projection. The low unemployment and underemployment rates this March of 4.7% and 11.2% respectively, versus 5.8% and 15.8% in March 2022, and 7.8% and 15.9% in 2021 already point to higher growth in 2023 than 2022 in the next three quarters.
SOURCES OF PHILIPPINE GROWTH
I checked the components of the Philippine’s GDP over the last six years. The good news is that on the demand side, growth in 2022 and 2023 was led by private investment or gross capital formation which comprises 22% of GDP, followed by household consumption which is 75% of GDP.
On the supply side, GDP growth was led by the Services sector which comprises 61% of GDP, manufacturing (20% of GDP) in 2022, and Finance (10% of GDP). Transportation and storage had high growth but comprised only 3.5% of GDP (see Table 2).
LOCKDOWN, VAX-VAX-VAX, AND THE ECONOMY
The single worst economic policy made by the previous Duterte administration was the strict prolonged lockdown and business closures in 2020-2021. The Philippines experienced a GDP contraction of 9.5% in 2020 – the worst in Asia that year, and the worst in Philippine economic history since just after World War 2.
The single best economic policy made by the current Marcos Jr. administration has been the lifting of all forms of domestic mobility restrictions, and promising that he will not impose new lockdowns.
But President Marcos Jr. still has to neutralize the remnants of the lockdown, the vax-vax-vax deep state in Philippine bureaucracy especially at the Department of Health (DoH) and its consultants, authoritarians with “MD” after their names. The entry of more foreign visitors is still partially hampered by the need for vaccinations or a negative test (if unvaccinated) upon entry. The vax-vax-vax business is assured of continuity.
I think the President made a mistake in keeping Dr. Maria Rosario Vergeire as DoH Acting Secretary for a year because she continued the same virus scare-mongering unless vaxxed done by the previous secretary, Francisco Duque III.
The next DoH Secretary should veer 180 degrees away from the scaremongering, economy-crippling medical tyranny espoused by the previous and current DoH leadership. No more lockdowns, no more mobility restrictions, no more mandatory vax-vax-vax which required about P150 billion in new borrowing from 2021-2022 which will have to be paid by future high taxes.
Economic freedom will unleash the entrepreneurial spirit and consumer confidence. And sustain growth at high levels. With economic freedom and no medical-political tyranny, I see GDP growth of 7.1-7.5% in full-year 2023.
Bienvenido S. Oplas, Jr. is the president of Bienvenido S. Oplas, Jr. Research Consultancy Services, and Minimal Government Thinkers.