The supposed jubilation proceeding the Christmas season should have dissipated along with the “multitude” amount of windfall earned during the season (thanks to bigger tax exemptions) but actually, the merriment has not ceased after all. The holiday euphoria has been rekindled by the excitement about the forthcoming presidential poll, that happens only once in six years. Perhaps, more than the joy conveyed by the holiday cheers, the enthusiasm for a change in government leadership brings greater hope and challenge to many, while it may be lost political opportunities to some.
As expected, the election stands to either be beneficial or detrimental to Filipinos and other stakeholders. Past national elections showed an upbeat stance upon the assumption of a new leader. Presumably the society does not really care whoever rises to power, either because people are fed up with the old rule or they are wanting in leadership styles. It is also notable that here in the country, traditions show that many people vote for personality more than anything else.
In his study, Dr. Cielito Habito noted that the election years in 2004, 2007, 2010 and 2013 saw GDP grew by 6.2 percent, 7.2 percent, 7.3 percent and 7.2 percent, respectively versus an average of 4.4 percent for non-election years. Not only will election-related activities accelerate money in circulation but more than that, employment, temporary or otherwise likewise, stand to benefit from this periodic event. Of course, increased income induces an increased buying capacity of consumers, stimulates price increase, but will nevertheless be offset by the increase in people’s purchasing power.
Given that scenario, it will not be surprising that exhilaration past the voting period may bring in the economic growth that we want plus the added confidence that will further boost economic development, at least for 2016.
However, we should give credit where credit is due, because the past five and a half years of President Aquino's rule saw a record-breaking show of confidence and support by the people for his rule. Despite some decline in his trust rating on account of some incidents like the Mamasapano massacre, it has never gone down to border line, lower than “GOOD” category. He was the only one among the past presidents for the past five decades who has been consistently enjoying the people’s confidence. In fact, most achievements especially on credit rating upgrade that we have earned has been generated because of the perception of an improving economy as observed by the people not because there was really something concretely improved in terms of macroeconomic fundamentals.
What actually has performed well are the same indicators that has been in constant progress even without government program or support and that is consumer spending and foreign remittances plus the income of Filipino-owned companies based abroad but remitted locally. Collectively, they are called Net Factor Income from Abroad. Consumer spending in the four quarters of the country’s economic activity in 2015 has always been the biggest contributor to GDP growth.
Stock market
The way the economy will move given all the indicators mentioned and the anticipated changing of the guards at Malacañang, we can see a steady improvement in the bourse. The fast year saw a lot of disappointment in its performance, thanks but no thanks primarily to the China crisis. What was earned as far as its record breaking performance is concerned (even breaching the more than 8,000 index points) has been wiped out by the past years’ financial fiasco.
But basing on the current economic indicators which are gradually accelerating plus the added considerable boost that will be generated by the forthcoming political exercise and the changing of the guards at the seat of power, we can see a “light at the end of the tunnel.” That is also true with Western economy because come Nov. 8, 2016 we anticipate a change in the national leadership of the world’s most powerful nation, the United States of America.
This will influence our local stocks indirectly. Our local bourse daily turnover which averages P8 billion to P10 billion is not even a fraction of the daily turnover of the New York Stock Exchange (NYSE) which averaged around $10 billion!
For practical purposes, shareholders should try to have a feel of the market and the economy outside of their comfort zone to make an objective judgment of the game being played. By and large, the bourse market is dominated by two strong emotions, GREED and FEAR. These emotions the objectivity of the player, when one is continuously selling, when in fact he should be buying, then he is dominated by FEAR; on the other hand, when a player is continuously buying when in fact he should be selling then he is dominated by GREED. Our prudent and objective assessment of the situation will bail us out of this highly volatile investment tool.
Although we may not realize an immediate end to the China crisis, the local business environment coupled with the expected political and economic expansions locally, we presume to realize an active financial market by the second half of the year.
Emmanuel J. Lopez is an associate professor at the University of Santo Tomas and the chair of its Department of Economics. Views reflected in this article are his own. For comments email: doc.ejlopez@gmail.com