The Market Monitor Minding the Nation's Business
By DIEGO C. CAGAHASTIAN
WHILE the Philippines will most likely fail to attain the status of upper-middle-income-country (UMIC) by the end of this year, Economic Planning Secretary Arsenio Balisacan exudes confidence that the country will finally make it next year or in the years to come.
Balisacan admitted that the country’s economy needs to perform exceedingly well for several years to improve its income status in the community of nations.
The Cabinet officials in charge of economic planning conceded that the current investigations on large-scale irregularities in public works and flood control projects have caused uncertainties in the economy, such as the erosion of investor confidence and a slowdown in government spending.
Balisacan said, “To put the economy back on its growth trajectory, the government needs to increase spending and improve the quality of that spending.”
The secretary said both of these tacts are equally important, especially in the aftermath of the DPWH scandals.
Balisacan recognized that there is so much space in improving the quality of the spending.
“Even if we have to reduce the overall level of spending, if it is going to the right areas, the right sectors, the right priorities that we are working on, the impact on the overall economy and the inclusivity of growth will be even greater. I would prefer that than just simply raising spending,” he said.
Guarded optimism
Other economists are predicting that the Gross Domestic Product (GDP) will accelerate to around 6.2%, thereby painting a rosy picture for next year.
BSP Governor Eli M. Remolona Jr. has said the economy might expand by only 4-5% this year, compared with the government’s 5.5-6.5% goal.
Both Balisacan and Remolona consider this target as now out of reach, considering the damage done by the flood control scandals to the economy, and its concomitant slowing of government spending on key projects.
The economy grew 4% in the third quarter as consumer and investor sentiment weakened amid the budget scandal, pulling the nine-month average to 5%.
With strong optimism, Balisacan said he believes the Philippine economy is “still strong” but it is very unlikely that the government will hit its 2025 GDP goal.
International headwinds
Stoking the heat of the economy’s problems are international geopolitical events that are expected to become serious by next year.
Center among these are the spat between China and Japan over Taiwan, where some 200,000 Overseas Filipinos Workers (OFWs) are based, contributing a huge share in total remittances.
A war among major powers over Taiwan will result in a displacement of many of these workers, while the country cannot yet provide jobs to returning OFWs all over the world.
The weak yen and the onset of higher yields on Japanese bonds and higher interest rate in that country will negatively affect the United States, Europe, and even Southeast Asia, including the Philippines next year.
The year 2026, therefore, is laced with risks and peril, and the nation should always be on guarded optimism when it comes to projecting what lies ahead.