Is the PH economy finally recovering?

Come on government, no pressure. (Photo: Diplomatist)

The high price of old scars

As I’m sure a lot of you have noticed already, trying to be optimistic about the economy hasn’t exactly been a pleasant experience. If we were to look at past trends, the Philippines experiences massive inflation problems during periods of extreme political tension and worldwide conflicts. 

The last few days of the 1944 Japanese occupation caused hyperinflation, which meant that the monthly inflation rate breached the 50% mark. Not to worry though, our numbers aren’t anywhere near that and the only significant Japanese occupation happening around here are our sushi cravings.

In 1974, the war in the Middle East brought about energy crises which brought inflation numbers up to 34%. And the one that most people will probably be more familiar with is the 20%-50% inflation rate of 1983-1984 brought about by the massive international debt crisis of President Ferdinand Marcos’ term. Sound familiar? 

History seems to be repeating itself with the appointment of Marcos Jr. as the new president of the Philippines, the country that has astonishing levels of debt to pay from past administrations and COVID-19 spending—which probably won’t stop anytime soon.

Luckily, the current administration does have plans to try and improve the current state of the economy. Last Tuesday, Finance Secretary Benjamin Diokno, pitched to the senate the Marcos Jr. administration’s legislative agenda that has yet to be approved. This includes the real property valuation and assessment reform bill, as well as the passive income and financial intermediary taxation bill. 

At first glance, people might scoff at the thought of more taxes. It’s easy to just think that the government just wants to get more of our money to pay off debts that were accumulated before any of us were even born. The new tax reforms being proposed are actually aimed at improving land valuation and capital markets taxation—assuming that they’re well implemented. 

So far so good?

There was early fear that the economy would be damaged beyond repair under the Marcos Jr. administration due to major investors pulling out of the local scene and following the suggestion of the former Duterte administration to impose higher taxes.

Diokno has gone on record to say that he and President Marcos Jr. aren’t in favor of asking for more money from the people who are already trying their best to stay afloat amidst an economically-harsh pandemic. 

As for the 6.4% inflation that hit last month? Diokno believes that it hit its peak, also claiming that the value of the peso will be stronger by the end of 2022. There’s a lot of speculation going on around here, I’ll have to start seeing some of these claims soon. 

“Inflation hit 6.4% last month but I bet this has already peaked. As you know oil prices have started to go down. So, we expect inflation to start to decelerate towards the end of the year,” Diokno said in a statement last Wednesday. 

Diokno explains that increases in Filipino OFW remittances moving into the fourth quarter have caused the peso to stabilize. If things continue the way things are now, we could be seeing a P55-to-the-dollar level by December. 

Speaking of foreign-related money, we’ve been getting a lot of it recently. According to the Philippine Statistics Authority (PSA), foreign investments in the Philippines have grown by 105% to P46.23 billion from April to June.

The Netherlands was the top investor with a 41.2% share amounting to P19.04 billion, followed by Singapore which promised P15.89 billion, and Japan with P6.51 billion.

All the foreign investments made in the second quarter are projected to create 12,626 jobs for Filipinos. 

Rizal Commercial Banking Corp. chief economist Michael Ricafort points toward easing alert levels in Metro Manila down to level one being the main catalyst for investment firms to develop new expansion projects in the country. 

The Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act was also very instrumental in enticing more foreign investors to come in as it lowered corporate income tax rates and added more security to investments.

“Attracting or encouraging more foreign investments/FDIs (foreign direct investments) into the country is a pillar in the country’s economic recovery program since they create more jobs or employment and other business or economic activities in the country,” Ricafort says. 

Admittedly, I was very skeptical about the government’s fiscal and economic plans as inflation continues to get worse on a monthly basis. You just have to look at my past issues to know why. However, things being set up now are painting a picture that might not be too bad to look at. As much as I would love to believe all the good things being said about economic recovery, I remain cautiously optimistic for what’s to come.