Here is my modest list of the main economic events of this year, international, regional, national news.
1. Global investments are increasing. After the global economic and trade slowdown in 2015-2017, foreign direct investment (FDI) resumed its expansion in 2018. The United States remains the most attractive first investment area for many multinationals and individuals around the world, followed by Hong Kong, China, and Singapore. The Philippines lags behind here.
2. Merchandise exports have also recovered. Before the establishment of the World Trade Organization (WTO) in 1995, export levels for many countries were low in 1994. After 23 years – from 1995 to 2018 – Vietnam and China have been the biggest benefactors, with China now being the world’s largest exporter, followed by the United States and Germany. And the Philippines continues to lag behind (see table 1).
3. First phase of the trade agreement between the United States and China. The United States will cut tariffs from 15% to 7.5% on $120 billion of Chinese exports and suspend planned tariff hikes on other goods indefinitely. China has made no tariff reduction commitments, but will increase US imports by at least $200 billion in 2020-21. China will also end its long-standing practice of forcing or pressuring foreign companies to transfer technology to Chinese companies as a condition of gaining market access and government business approvals.
4. Brexit victory. After his victory in the June 2016 referendum, years passed and he was not implemented. Britain’s new Prime Minister Boris Johnson (‘Bojo’) is determined to push it forward – his Conservative party won a big victory in the recent election and Brexit will happen by the end of January 2020. The UK will have the freedom to conclude free trade agreements (FTAs) with many countries outside the EU. A US-UK FTA, a Trump-Bojo partnership, will be very exciting from 2020.
5. Stable regional inflation. Good news here – of the 11 major East Asian economies, six have experienced inflation rates below 1%. The Philippines also exited the ‘inflation major’ in 2018 at 5.9% and has significantly reduced it to 2.5% year-to-date (ytd).
6. Slower GDP growth. Of the 11 East Asian economies, seven, including the Philippines, have seen declining trends from 2017 to 2019 since the start of the year. Vietnam retains its rapid growth of 7% – in the region it is the main beneficiary of the trade and investment dispute between the United States and China (see table 2).
7. The Philippines’ unemployment rate continued to decline. It fell from 6% in October 2014 to just 4.5% in October 2019 – but the activity rate (LFPR) is also down, from 64.3% to 61.5% in the same period. A falling LFPR means people are less confident they will be hired, so they delay job hunting and pursue more education and training (see table 3).
8. Increase in the debt ratio of the Philippines. The country has seen a sustained reduction in its public debt-to-GDP ratio from 52% in 2010 to just 42% in 2016. The Duterte administration’s borrow-borrow-borrow policy halted the decline — while it was again by 42% in 2017-2018, it has increased. to 45% in 2019.
9. Price controls in many sectors. Among many examples are: a.) the Land Transportation Franchising and Regulatory Board and the Philippine Competition Commission imposing surge control and high penalties on Transportation Network Vehicle Services (TNVS); b.) the Energy Regulatory Commission has proposed a lower electricity price cap in the Wholesale Electricity Spot Market (WESM); c.) the Ministry of Health proposed drug price controls; and, d.) expanded mandatory fee reductions for students throughout the year.
10. Water policy. The cancellation of extensions until 2037 of the Maynilad and Manila Water concessions, the non-payment of penalties of nearly 11 billion pesos to the government for its water price control policy from 2013.
The numerous populist policies of the Duterte administration, such as the numerous gifts and subsidies and the breach of contracts, will have negative fiscal and investment impacts on the economy.
Bienvenido S. Oplas, Jr. is the president of Minimal Government Thinkers.