DEBT: Searching for the holy grail of economic growth (2nd and Final Part)

By:? Mario G. Zavalla |? November 30 , 2024

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??????????“Philippine economic growth slows?to 5.2% in Q3 2024”? ?Nov. 7, 2024

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This probably disappointed many, shocked a few, or vice-versa. It also disappointed yours truly very much. This is one of the rare times I wish I am as optimistic about the country’s economic future as Secretary Recto of the DOF. However, the numbers tell me another story. As far as I am concerned, it’s game over for 2024. With a third quarter GDP of 5.2%, the economy needs to achieve a growth rate of 8.7% in the last quarter in order to pull off an average growth rate of 6.5%, the lower end of the government-set GDP target for 2024, a very remote possibility given the present problems and near-term prospects faced by the domestic economy today.

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Indeed, it is hard to believe otherwise, especially after a series of new developments which could seriously affect the economy’s growth momentum, viz., the lower-than-targeted third quarter GDP growth rate of 5.2%, the extensive damage caused by the series of typhoons that hit several regions in the country during the last two to three weeks, the deteriorating exchange rate that will surely add extra pressure on domestic prices, and lastly, ?the plan of the government to increase national debt from more than P15 trillion today to P20 trillion by 2028 which will further strain the fiscal position of the government unless higher growth is attained.

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Higher growth, however, has remained elusive since 1973 when the economy posted a record growth rate of 8.8% which was repeated in 1976 attributable to favorable prices of several Philippine agricultural commodities, notably sugar and, to a lesser extent, coconut. How the Philippines managed to lose its place from being the 9th largest sugar producer in the world in 2005 to 17th place in 2023 and from being a big foreign exchange earner contributing some 25% of the total export earnings of the country to a sugar importer is a story of what it takes to compete, survive and prosper in the world of agricultural commodities exportation. It gives the country’s economic planners a very good reason why we are losing to our ASEAN peers in the GDP race. In the meantime, millions of us will have to continue toiling and paying taxes and at the same time consuming sugar sold in most countries at a lower price.

Talk about throwing people under the bus!

And if the situation described is not enough, Secretary Laurel of the Department of Agriculture (DA) is now proposing “to modernize farms, improve food security, improve earnings for farmers and fisherfolk via mechanization” although nothing was mentioned about a plan to mitigate the extent of damages to agriculture caused by yearly typhoons that do not fail to ravage Philippine agriculture every year. Typhoon Odette, for example, has been identified as one of the principal causes of the big drop in sugar production in crop year 2021-2022 which led to a price spiral in the retail price of sugar that reached almost P100 per kilo sometime in mid-2022. ?

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Typhoon? Kristine, in another instance, which hit Luzon last month damaged 72,329 hectares of farmlands and affected 74,554 farmers in 11 regions. Losses were estimated at P3.11 billion. So, imagine the effects to the domestic economy if it loses P3.11 billion per typhoon per year,? not counting yet the money the government borrowed to bankroll its investment in agriculture….and that is why banks are generally shy to lend or invest in agriculture. Based on an earlier estimate made by former Agriculture Secretary William Dar, a modernization and industrialization plan for the agriculture sector would need more than P2.5 trillion investment plus budgetary support during a 10-year period.

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Is this really the best the government can do right now?

it might be worth the time of Secretary Laurel to make a trip to the 25,000-hectare pineapple plantation of Del Monte Philippines in Bukidnon. He might also want to look into the feasibility of developing countrywide the practice of intercropping on coconut lands and mango plantations. Some of my relatives in Batangas have leased their coconut lands not to big corporations but to ordinary Filipino entrepreneurs who are not receiving six-figure salaries monthly, who do not have government budgetary support nor thousands of employees unlike Secretary Laurel.

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The only development prospect that I can think of right now which can provide the heavy lifting to drive economic growth for several years is the implementation of the Special Friendship and Alliance between the Philippines and the U.S. For those who wish to read the article on the subject, please copy the following URL and paste it in your search box: FACT SHEET: Investing in the Special Friendship and Alliance Between the United States and the Philippines | The White House.

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P.S.? We urge our readers to read also Part I of this article with the heading:? DEBT:? How much is too much?

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To our online friends and readers, Merry Christmas and a safe New Year!!!??????????????????????????????????????????????????????????????????????????????????????????????

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