Chinese business community predicts better economic growth

In mid-February, Asians worldwide – from Singapore, Shanghai, Seoul, Hong Kong, Taipei, Kuala Lumpur, Bangkok, Saigon (Ho Chi Minh City), Tokyo to San Francisco – will celebrate the ancient Lunar New Year festival with growing number of experts predicting American-led world economic recovery. This is the new Year of the Horse, an auspicious symbol of vigor and vitality in Chinese tradition.

Recently, the Federation of Filipino-Chinese Chambers of Commerce and Industry, Inc. (FFCCCII) prepared a briefing paper through Federation Institute for Business and Economic Research (FIBER), which forecast that Philippine economic growth will be stronger this year compared to 2001. The Chinese business community is one of the most resilient sectors of the Philippine economy, even during the worst economic and political times, and any sign of optimism on the Philippine economic future from this sector can easily spread to other dynamic entrepreneurs and investors throughout the Asia Pacific region.

FFCCCII was established in 1954 and it is known for its socio-civic projects such as the "Operation Barrio Schools," the country’s biggest private-sector project to help build and donate public schoolhouses for the benefit of poor rural regions nationwide. JG Summit Holdings founder John Gokongwei Jr. recently told Philippine STAR that his group supports this project and had donated two public schoolhouses, which were solicited by his business competitor and FFCCCII past president Lucio C. Tan.

The paper of the FFCCCII’s FIBER has a more sober assessment of the Philippine economic performance last year compared to that of President Gloria Macapagal-Arroyo’s more positive claims of success. The paper said: "Our economy grew in 2001 – good enough to keep us out of a recession, but not good enough to preserve the jobs of many Filipinos. Compared to China, whose economy grew in the vicinity of seven to eight percent, our 3.1 to 3.3 percent gross domestic product (GDP) growth in 2001 was no match at all. But compared to some of the Asian Tigers, the Philippines did quite well. We managed to remain afloat."

On the prospects for a better economy this Year of the Horse, it said: "We maintain our guarded optimism for 2002 as we watch signs of recovery in the American economy. We also maintain our position that we have to cultivate our domestic sources of growth to ensure our recovery in 2002."

More Realistic Forecasts Vs. Government Forecasts

It is very rare and almost unprecedented for a group or agency of the usually low-profile Chinese business community to publicly announce its forecast about the Philippine economy. Another unique facet of this report is its disagreement with government’s more optimistic economic forecasts.

Curiously, the briefing paper also had a note which said: "Views presented in this paper do not represent the position of the Federation of Filipino Chinese Chambers of Commerce and Industry, Inc. or any of its officers and members." However, below this note is another sentence which says that the Federation Institute for Business and Economic Research is a project of the FFCCCII.

In its briefing paper, the Federation said: "Government is targetting a gross domestic product (GDP) growth of 4 to 4.5 percent in 2002. This is premised on the assumption of a second semester recovery in the American economy and in the electronics sector."

Challenge Increasing Poverty & Loss Of Jobs

According to the paper, one of the biggest social and economic challenges faced by government and the rest of society is the poverty incidence in the country which has been increasing over the past four years, from 31.8 percent in 1997 to 34.2 percent in 2000. More than 700,000 families were added to the number of poor families from 1997 to 2000. There are 5.2 million poor families all over the country as of year 2000.

Unemployment is becoming a real problem, which could be reversed only if the predicted Philippine economic recovery happens this year. For the first 10 months of 2001, lay-offs due to bad business caused an average of 367 workers per day losing their jobs, which creates a significant social and economic problem.

It pointed out that more than half the jobs lost last year were in manufacturing enterprises. It said that local factories were hit by "a double whammy" of the global slowdown that weakened Philippine exports and the second problem was the proliferation of low-cost imports (whether legally imported or smuggled).

Us Recovery After June, Exchange Rate At P52.50

The paper adds: "Our own projections point to an improvement in GDP in 2002, but not to the extent targeted by government. We share the view that there will be recovery in America after June and that the technology sector will be on a rebound before the end of 2002 (possible earlier). On the whole, GDP is expected to grow at 3.4 percent next year, with much of the impetus coming from services and agriculture on the supply side and from consumer spending on the demand side. We can also expect some growth from exports in the second half of the year in response to a global recovery. The one percent growth in exports (expressed in real peso terms) that we are projecting assumes such an improvement in our external markets."

On inflation, the paper said: "We expect inflation to be within government projections of six to seven percent. As long as agricultural production and food distribution is not severely curtailed by unexpected events (e.g. destructive typhoons, pests, etc.), over-all inflation will remain stable."

"The exchange rate is expected to gradually depreciate, possibly breaching the P52.50/US$1 average level used by government in its macroeconomic forecasts."

Interest Rates Low, P26 Billion Funds For Loans To Business

On bank interest rates, it said: "Domestic interest rates are also expected to remain low as the Bangko Sentral ng Pilipinas (BSP) continues to ease monetary policy." The government had also recently reduced the liquidity reserve requirements by two percentage points, meaning that up to P26 billion pesos in funds are expected to be freed from banks, which are expected to transform this money into more loans for business people and consumers to engage in productive activities that will accelerate Philippine economic recovery.

The Federation paper predicted: "June 2002 is fast becoming a reckoning point on the direction of the global economy. Six months from now, we will know for sure if our assumptions regarding the American economy are accurate, or at least, on the way to being realized. But the reality is that not all sectors of the Philippine economy can take full advantage of that recovery if and when it materializes. That is why we are not yet off the hook. We have to continue cultivating our domestic sources of growth, whether it is in the form of stimulating demand for Filipino products or generating more opportunities for Filipino investors."

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