Light at the end of the “tunnel of poverty”

24 June 2013

The announcement earlier that the quantitative easing move previously adopted by the US Central Bank to stimulate their economy would be relaxed by year-end indicated that interest rates in the US would go up thereby making capital investments there attractive.

This triggered the recent sudden flight of foreign funds, or short term capital, from our equity market and caused the sudden depreciation of the peso from 40 to 43 to a US dollar as well as the Philippine Stock Exchange index to plunge by 12.4%, over a four day period, from 6, 875 on June 10, 2013 to 6, 114 on June 14.

Despite this, however, prominent economists like UP’s Gerry Sicat  (http://www.philstar.com/ business /2013/06/19/955562/recent-macroeconomic-developments-peso-local-stocks-and-us-quantitative) and UA&P’s Victor Abola (http://www.philstar.com/business/2013/06/21/956297/phl-seen-sustain-growth-thrust), as well as two of the country’s top economic managers namely NEDA Director General Arsenio Balicasan and Banco Sentral ng Pilipinas Governor Amando Tetangco (http://www.philstar.com/business /2013/05/31/948611/news-analysis-economy-grows-7.8-pct-q1-coupled-plunging-stocks-weakening) feel that the country’s economy is still sound, since our currrency’s depreciation and the diving of the PSEi has not altered the economic fundamentals.

This is because the country’s economy has grown on, among other factors, the strength of its manufacturing sector (which accounts for 21% of the GDP), robust domestic consumption, higher government spending particularly on infrastructure, private construction (hotels, commercial buildings and homes), sustained remittance inflows, low inflation (projected to average 2.8% by year end), increasing tourist arrivals (1.6 million from January to April 2013) despite the conflict with China, business confidence as well as consumer optimism.

Some of the economists are also of the thinking that the peso’s depreciation has its positive effects as it would boost the export (expected to grow by 6-8% by year end) as well as BPO (projected to grow 15-20% in the next 5 years) businesses since it will enable them to regain the competitiveness they lost due to earlier appreciation of the peso. It will also boost the purchasing power of the OFW families.

What’s being implied so far is that the claimed economic improvement of the country is real, and with a sound foundation, from which it would get the strength to withstand the current financial turbulence now being experienced worldwide.

Of course it’s also true that despite the bannered remarkable improvement in the country’s GDP last year and this year’s first quarter, benefits have not yet filtered down to the bulk of our population, and I can’t blame our poor countrymen who have somehow expressed their impatience waiting for the hoped for economic relief that would help them address their basic needs as human beings. As reported not too long ago by the NSCB, the poverty incidence in the country as of the first semester of 2012 was 27.9%, or more than a fourth of the population; and that the unemployment rate as of April 2013 was 7.5%, or 2.894 million of the 40.8 million work force (http: //www. philstar.com/headlines/ 2013/03/16/920206/unemployment-rate-unchanged).

It may be difficult for our poor to understand it, but economic progress, or the demolition of poverty cannot be attained in an instant. As mentioned in earlier columns, it took the countries of the first world centuries to do it and the Tiger economies of the last century the equivalent of more or less a generation, that is 20 -30 years . Even our Asean neighbors (i.e. Malaysia, Thailand and Indonesia) who are currently enjoying prosperity (I understand) started their economic progress since the late 80s more than 20 years ago. And they did it because they were able to tap then the surge of foreign direct investments that drove their economy, an opportunity which I think we missed because of the havoc brought about by the series of failed military coup d’etat at that time.

But there is now light that can be seen at the end of the “tunnel of poverty”, so to speak, because unlike in the 80s, a strong foundation has already been laid to enable us to tap, this time, the next round of foreign investment opportunities that will come our way. I say this because unlike before, we now have the investment grade rating that the country has received from at least three reliable sovereign rating agencies - a credential that should attract the attention of foreign direct investors, especially those that are currently posed to exit China. This achievement of course was made possible by the sound economic fundamentals that probably started to take root during previous administrations but built into the internationally recognized robust economic structure that it now is, through the Tuwid na Daan inspired governance of President Noynoy and his team.

Another factor going for us is that the President, for the last three years of his term, can now expect a more favorable (if not solid) support, particularly from the legislative branch, for his programs geared to eliminate poverty.

One thought that comes to mind at this point is that so far, the President has brought the country to this dawn of an economic renaissance, and he accomplished this during the first half of his term despite the detrimental effects of the booby-traps placed along his governance path during the early years. I would therefore not hesitate, as a citizen, to give my total support to whatever his game plan is for the final half of his term. And I trust that, as it was in his first three years, it would be geared towards intensifying if not institutionalizing the practice of Tuwid na Daan, as well as pursuing with more vigor the elimination of poverty in our country.

But then the President and his team cannot do it just by themselves. Everyone should participate in the effort to achieve these objectives, especially from us ordinary citizen in our own little ways, even if it is just to let the President and others know that we appreciate his efforts, and that we support him and his team.

Comments/reactions will be appreciated and can be sent through this writer’s email (sl3.mekaniko@gmail.com) or through this writer’s blog (http://mekaniko-sl3.blogspot.com).