What a great year for the 2019 Philippine economy. It may be a bit difficult to understand why, specially for those without an economic background. But here at Flying Ketchup, we are determined to give you the good news. Even though we are not economists, we can lay down the facts.
A lot of factors are at play, but some basic economic indicators point to the great performance of our economy this year. This will lay the foundation for the continued growth of the Philippine economy for 2020, and the years ahead.
Inflation well within target for 2019
First off in discussing the 2019 Philippine economy, let’s talk about inflation. Inflation is defined as a general increase in prices of consumer goods. This then directly influences the purchasing power of a currency. Ideally, inflation should be kept low and stable, so that market prices could be kept stable as well.
For 2019, inflation was kept within the target of the Bangko Sentral ng Pilipinas (BSP), as forecasted at the start of the year. During this time, inflation was already lowering, and was expected to fall within the 2-4% target of the BSP within 2019.
BSP Assistant Governor Francisco Dakila explained that the downturn could be explained by a number of factors. The TRAIN Law was a major contributor, because the local tax structure was adjusted, and excise tax on oil products experienced during that period was already factored in. Another major contributor to the lowering inflation rate was the progress on the Rice Tariffication Bill, which expected to reduce inflation by 0.8%.
In February, inflation was recorded at 3.8%, mainly due to stabilizing food prices. By June, inflation already fell well within the target range, as inflation at the end of Q2 was recorded at 2.7.% This was the lowest rate recorded in 22 months.
Data at the end of November showed that year-to-date average of inflation at 2.5%. Inflation rate seems to be stabilizing, coming from a near-decade high of 6.7% in October 2018 – a big green check for the 2019 Philippine economy.
PH economy at consistently above-average growth
This managed inflation rate is paired with a forecast that the country’s Gross Domestic Product (GDP) is expected to double by 2026. This was released in an economic research report by market intelligence firm IHS Markit as early as last April.
GDP is defined by the total value of goods produced and services provided by a country. This is the most-tracked metric when economists talk about economic growth.
According to IHS Markit, the long-term outlook for the Philippines is “very positive.” The Philippines’ GDP is expected to double from $330 billion in 2018 to $672 billion by 2026.
This was echoed by the World Bank in their 2019 Philippines Economic Update, released last October. According to the report, the 2019 Philippine economy remains strong, and is projected to grow an additional 5.8% this year. Growth for the next two years is expected to be at 6%.
Filipinos are getting out of poverty
All fundamentals point to our economy consistently getting stronger. This was recognized by international debt watcher S&P Global. They have already upgraded the country’s credit rating to “BBB+” due to the Philippines’ “above-average economic growth, a healthy external position, and sustainable public finance.”
This is just a notch lower than the “A-” rating, which is within the territory of the highest credit-rating investment grade of S&P.
But the metrics with the most impact to the daily lives of Filipinos are the ones on poverty.
Economist Solita Collas-Monsod painted a picture of the improving state of the Philippine economy, as she recently praised the Duterte administration in her column on a daily newspaper.
Monsod cited several poverty data that points to a better life for Filipinos. The 2018 Family Income and Expenditures Survey showed that the percentage of families who are below the “poverty threshold” fell from 17.9% to 12.1%. The percentage of the population who were classified as poor fell from 23.3% to 16.6%.
This directly translates to 5.9 million Filipinos, or 1.1 million Filipino families that have already gotten out of poverty. Monsod even said that, “not since the Ramos administration has the war on poverty been so effectively pursued.”
The Philippines as a preferred business destination
Economists would agree that a lot of government initiatives contributed to the stable and growing 2019 Philippine economy.
This growth, and the upgrade on our credit rating, means that the Philippines remains attractive for foreign investors.
A survey released early this year showed that the Philippines is the preferred area of potential expansion by Australian companies. Singapore considers the Philippines as among the top 10 markets of interest for their businesses.
Additionally, President Duterte’s visit in Russia during the latter part of the year enabled him to secure more than ₱620 million worth of business deals. Strong ties with non-traditional trading partners is a sign of very good things to come.
A stronger economy, a #BetterPhilippines
The 2019 Philippine economy indicates that the right factors are in place for the continued prosperity of our country. We are faced with exciting times ahead, and should work together to capitalize on this performance. Hand in hand, we can be sure to achieve a brighter future, and a comfortable life for all.