Coasting along

Things may not look too rosy yet this year for developed countries like the US, Japan and those in Europe, but in Asia – and even the Philippines – the optimism is already brimming even if there is the occasional cautious hesitation.

Filipinos may have crossed over to the new year groaning because of generally higher prices of basic commodities, with inflation for 2009 hitting on the high side at 4.4 percent towards the latter part of the year. But most still have their jobs here or abroad, and this is what matters more to our countrymen.

Inflation this year is projected to be higher, with the central bank looking at a range between 3.5 percent and 5.5 percent, with volatility still because of food. This is definitely higher than the range that was set for 2009 of between 2.5 percent and 4.5 percent.

The Philippines had posted a one percent growth last year, something that we can gloat about given the fact that most of our neighbors suffered from negative growth. But this year, with the global crisis pains easing, we will be in for some tough competition.

Vietnam, Lao, Indonesia as well as Malaysia are eyeing growth rates higher than five percent. Even Thailand, which took a beating last year to chalk a negative (-3 percent) GDP growth, is pushing to grow its economy by 3.5 percent.

Remittances to the rescue again

This year, economists forecast the Philippines to grow by 3.3 percent, and while this will come in part from reinvigorated exports, the bulk will still be resulting from consumer spending fueled by another unprecedented rise in remittances sent by our expatriate working countrymen.

Remittance inflow is seen to once again to surpass previous levels, growing by at least six percent this year, or about $1 billion, to more than $18.1 billion. More optimistic estimates tag the inflow growth to more than eight percent.

Not a sound basis for economic health

Growth in remittances will undoubtedly help buoy the economy as it tries to rise from the debilitating scourges of past typhoons and disasters. But this should not be the end-all. Remittances are becoming the staple indicator that links the health of the Philippine economy, and does not provide for a sound basis on which the country could peg its growth.

As a result, the country is finding itself once again a laggard compared to others in the region that have continued to focus on luring more solid investments in manufacturing and agriculture to fuel their economies.

This year, in the absence of more radical stimulus to get the economy moving, the pace will continue to be ho-hum and placid – like a walk alone in the park under a moonlit sky. That is, if we don’t get more than the usual share of typhoons or disasters.

Caught sleeping

With tariff barriers on about 8,000 more products among the six member countries comprising the Association of Southeast Asian Nations and China finally lifted last January 1, it would be interesting to watch what the next move of our companies and their respective industry sectors would do.

Take note that Indonesia and the Philippines were the only two countries that lodged a last minute appeal with their respective governments to delay tariff liberalization by a few more years.

With trade liberalization moving full speed ahead in the region, affected local firms have vowed to mount their best effort not to be beaten by other countries, no matter that these have had the foresight of planning and preparations years ago.

If it’s any consolation, consumers can look forward to an influx of cheaper goods from neighboring countries, from finished and prepared foodstuff to motorcycle parts and motor vehicle cylinders.

Still a collection problem

On the fiscal side, the government’s biggest problem once again is managing the widening budget deficit, which in turn is aggravating the growing debt problem. External debt is now at around $53 billion, with government accounting for $31 billion or almost 60 percent of total debt.

Undoubtedly, the global crisis and the subsequent appropriation of a stimulus fund had affected the goal of balancing the government’s budget last year, bringing deficit levels to over P270 billion as of end November.

This year, the deficit is forecasted at P233.4 billion, but almost everyone is certain this will be revised upward nearer to P280 billion or even up to P300 billion. Once again, poor revenue collections and an anemic privatization environment are seen as reasons for the government’s dismal fiscal performance.

As a result, the government will continue to be an active player in the international bond market to source fresh funds that will pay off maturing debts as well as sustain day-to-day operations and finance essential infrastructure projects.

Election year syndrome

This year, an election year, expect government to definitely not consider passing new tax revenue measures. There will also be no impetus to go after tax leakages as well as pursue a consistent policy on tax incentives with the changing of the guards.

Any streamlining in government expenditures can also not be considered, not only because of the elections, but also because of continued spending for the reconstruction of infrastructure damaged by the back-to-back typhoons.

Nothing exciting

On all these fronts, the picture does not seem to make for any exciting action even if the mood continues to be optimistic. One can’t expect any special mention for the Philippines this year, at least in the field of business and the economy.

Let’s hope we have other stellar achievements that will improve the country’s standing in the international community. Well, we could look forward to more sizzling action from Manny Pacquio’s camp.

Champions League contest winners

Reminding all winners of the recent Philippine Collegiate Champions League (PCCL) contest: the deadline for claiming gift prizes is on Jan. 18, 2010.

Visit www.CollegiateChampionsLeague.net for more details.

Should you wish to share any insights, write me at Link Edge, 25th Floor, 139 Corporate Center, Valero Street, Salcedo Village, 1227 Makati City. Or e-mail me at [email protected]. For a compilation of previous articles, visit www.BizlinksPhilippines.net.