Economic probabilities for 2024

The title of this column is “economic probabilities” as forecasts are rarely accurate so all are probabilities. Many economic forecasts, including this column, always have a “caveat” that events will happen if the assumptions don’t change significantly. Economic predictions by fortune tellers are mostly shots in the dark. Once in a while, these black swan events happen and make a name for the fortune-teller. In these volatile, uncertain, complex, ambiguous 21st century, making a relatively accurate and credible forecast is difficult.

The major factors in any forecasts are historical events in previous years. The immediate prior years are guides for the continuation/cessation of some events, and backtracking more years may show some significant trends. Momentum has a lot to do with these and the belief in the recurrence of historical events. There is no 100% certainty of forecasts based solely on past experiences, as unforeseen events like COVID-19 pandemic, the unanticipated wars, and other global happenings that may impact the best forecasting models, even with AI advances, like doing data analytics for 100 years back and deriving multiple implications of previous events. Still, we have to make or rely on forecasts to strategize, plan, and make our budgets.

Despite the global difficulties in 2023 like the major and minor wars, economic recovery from the pandemic was commendable. The world economy still grew by 2% in 2023 even with China’s and some developing countries’ sputtering growth. US GDP growth at 3% was good and the EU economies were a positive mixed bag, even with the ongoing Russia-Ukraine war. The Gaza war, the geo-political issues in the West Philippine Sea, the Korean peninsula, civil wars in Africa, and the tensions Latin America/Eastern Europe had political and economic effects, but the economic globalization and recovery of the international supply chain continued. Inflation was a big problem for many countries, but was tapering in many countries in the last quarter. Economic disengagement with China and Russia by the US, Europe, and other western alliance countries did/could not happen as fast, as the world’s economy has been well interlinked in the past 40 years. Recent projections by the World bank/IMF is for the World economy to grow by 3% in 2024.

The Philippines is a minor player in the global economy. Geopolitically we are significant due to our proximity to the South China Sea, the Korean Peninsula, and the Taiwan Strait which are potential flashpoints between democratic countries and autocratic regimes. Due to the potential huge economic damages to all parties if war occurs, there is a less than 50% probability of a full-scale war in these areas in the next five years. So, while geo-political tensions will remain, there will be an uneasy calm in these areas in 2024.

The Philippine economy, likely post a 6% GDP growth in 2023, is poised to grow at the same rate for 2024. The lesser foreign trade component of the economy and the large domestic demand portion of our GDP worked in our favor during the supply chain disruptions. The significant OFW and BPO earnings even boosted domestic purchasing power that sustained domestic demand. The government was lost in improving/helping domestic supply from industry and agriculture, but monetary management by the BSP was good that inflation trended down and stabilized.

Income and wealth distribution haven’t improved much with 20% still below the poverty line and food poor. The government’s ballooning debt and the budget deficits are a matter of concern, but solvable with a GDP growth rate in the 8% to 9% annually. With a 75% probability, the Philippine economy will coast along with a 6.5% economic growth in 2024, given the global political/economic prognosis. Maybe even better if there is lesser corruption in the government, better government officials, and better governance. So help us God.