The Philippines must watch more closely economic developments and movements of its neighbors in Asia and ASEAN and not bother much about the US economic developments as US does not have much trade and investment with it (other than secondhand military equipment).
Instead of focusing so much attention on what happens to the US economy, the Philippines could do well to closely watch what is happening with its neighbors in Asia, which would have more and direct impact on its own economy.
Professor Emeritus Epictetus Patalunghug of the University of the Philippines told Business Mirror that a recession in the US may not even lead to a global recession.
Patalinghug said the Philippines should pay greater attention to what is happening to developments in China, Japan, South Korea, India, and the Asean region where most of the country’s exports and imports are involved.
“Watch what happens to China or to Japan that supply most of the financing for our infrastructure projects; the US has zero official development assistance for our social and economic projects. The US only gives military assistance, mostly second-hand military equipment, which has no impact on the economy,” Patalinghug also said.
Patalinghug added that the country’s trade is greater with its peers in the region, particularly the Association of Southeast Asian nations.
Philippine trade with ASEAN reached $4.31 billion in April 2022, the data from the Philippine Statistics Authority showed.
Black Swan events
Former Socioeconomic Planning Secretary Romulo L. Neri said looking at the developments in the region would help the incoming administration better prepare for so-called Black Swan events.
“A black swan is an unpredictable event with potentially severe consequences. Black swan events can cause catastrophic damage to the economy by negatively impacting markets and investments,” Neri said.
“Under such events, strategy formulation, which requires stable assumptions for the future, becomes an almost futile exercise in an environment of high uncertainty and volatility caused by such adverse disruptions,” he added.
Neri said climate change induced challenges such as droughts in Vietnam and Thailand, the Philippines’s primary source of rice, and should be closely monitored.
Diversify carbohydrate sources
He stressed the need to study options to diversify the source of carbohydrates—looking at root crops such as sweet potato—or aim for greater local rice production through expanded irrigation and upland rice production.
Apart from this, Neri stressed the need to monitor developments between China and Taiwan. Should China decide to invade Taiwan, he said the best way to deal with the situation is for the Philippines to strengthen its coordination with Malaysia and Indonesia to “present a strong and united defensive front.”
“We need a planning approach that will consider the differing scenarios that will take into account critical uncertainties and the driving forces that can lead to alternative possible futures resulting from a black swan,” Neri said.
“These scenarios are not predictions about what will happen; they are hypotheses about what could happen, designed to frame planning decisions. Scenario planning enables us to test the robustness of current strategies when faced with such black swan events,” he added.
‘No single superpower’
Former dean of the UP School of Labor and Industrial Relations (SOLAIR) Rene E. Ofreneo agreed with Patalinghug and said that no “single superpower” can dictate the fate of the global economy.
For one, Ofreneo said, it is not just the war in Eastern Europe that is affecting global trade. Other factors such as the negative impact of the pandemic on global value chains have not yet been resolved as well as the trade wars, sanctions, and the rising protectionism worldwide.
At the home front, Ofreneo said, the Philippines still faces numerous challenges that could lead to a “terribly vague” situation for the country. The country continues to struggle with a gaping inequality as well as low foreign investment—problems that have been around since before the pandemic.
Poverty incidence in the Philippines was at 23.7 percent in the first semester of 2021. This means 26.14 million Filipinos were living below the poverty threshold of P12,082 on average per month.
The income gap between the poor and the rich is at 27 percent. This means that on average, a poor family with five members needs an additional income of P3,262 to move out of poverty in the first semester of 2021.
Patalinghug said it is important to monitor what the economic team will do to address the challenges of Filipinos in the medium-term, citing gut issues such as affordable food and fuel sources as well as transportation challenges that allow millions to earn a living and access economic opportunities daily.
Energy
On energy, Patalinghug said it is important to monitor how the new energy secretary will source imported oil, or whether the new secretary will turn to cheap sources such as Iran and Russia just like what India and China are doing, or buy from expensive oil sources from Kuwait, Saudi Arabia, and UAE.
It is also important to watch how the new Department of Transportation secretary will address the lack of public transport.
“[This is] due to the stupid policy of LTFRB [Land Transportation Franchising and Regulatory Board] of not raising jeepney and bus fares to a minimum of P15 in the first 3 kilometers, while these poor jeepney and bus drivers are paying gasoline and diesel prices up to P100 per liter,” Patalinghug said.
Tags: #AsianandAsean, #blackswanevents, #economy