And I’m talking about the economy. Unlike visionaries, economic predictions are based on assumptions, usually a scenario building. The phrase “ceteris paribus” is used to hold everything else constant, which means that a scenario will hold true if other events are kept at bay. For me, this phrase is used as an excuse when the prediction did not materialize.
While I’m no economic expert, I will try to answer the question whether our country is bound for a bumpy ride in 2009 or are we just encountering humps as we enter an exclusive subdivision known as Economic Growth.
Signs
Good forecasters usually rely on signs. Doctors look for symptoms to strengthen its basis for an impending disease. In economics, it is hard to establish a general rule or rule of thumb as economies differ from one country to another. But let us try to establish a gauge to predict our economic performance next year.
1) Remittance. Last year’s GDP growth of about 7%was said to be anchored from Remittances. In a consumption driven economy, the continuous remittance from parents or relatives abroad will ensure ample liquidity to be consume locally. From 6 billion in 2000, there has been no sign of slowdown in inflows of remittances, reaching more than 200% growth in 2007. So far, remittance level is still healthy, although signs of slowing down are peaking in recent months. In October, remittance only grew by 3.3%. October marks the BER month and the Christmas season, when relatives abroad usually sends home money for the holidays. In the past years, we enjoyed double digit growth in October remittance, reaching as high as 36% in 2006. There are several reasons for the slowdown in remittance, but the obvious reasons would be that economic crisis has caught the Pinoys abroad, thereby keeping themselves liquid and limiting excess funds to send home.
2) External Trade. Our biggest export is electronics trade. While the growth in Trade should be a good economic indicator, export numbers has been a suspect of overstatement for the past years. But let’s put the benefit of the doubt on export numbers for this discussion. With the global crisis, people will surely scrimp on buying the latest Nokia cellphone or the high-tech laptops. To my knowledge, microchips for laptops and Nokia cellphones are being manufactured here. Current Trade numbers shows that our export growth decelerated to negative 15%, with electronic products at negative 20% growth. Year-to-date, we only grew by 2%. With these numbers, I do not think Export will carry us through the stormy 2009, unless we promote exporting something that the whole world cannot refuse to buy (can we export Manny Pacquiao to save our economy?).
3) Inflation. Inflation measures “acceleration: of price changes. Take note that a small inflation rate does not mean prices are falling, but rather increasing at a slower pace. Since 1995, we have seen all time highs in inflation rate, to as high as 12.4 percent in August 2008. Remember that it was in July 2008 when oil prices were in all time high as well, pulling up prices even in basic commodities. Now, inflation rate is back to single digit of 9.9% (would you believe it? A mere 0.1 difference?). People believes that all time highs in inflation is over, but I can feel that we will still experience increases in oil, not due to demand but due to supply as refiners will definitely cut down production of petroleum due to weak demand. I can sense that oil price will settle at $80/barrel, and if there will be increases in local pump prices, it would be on small amounts (P1.00/Li) on a monthly basis. Therefore, expect inflation to hover and play around the double-digit barrier.
4) Employment. While the government promised to create 1 million jobs yearly to narrow down unemployment numbers, the government never lived up to its promise. So if the government is really serious in dealing with the impending crisis, maybe it’s time it should look at the employment situation more seriously. Give people the opportunity to earn so that they can go on with their lives even in crisis. With the global crisis, prospects abroad will be limited, even the private employment will be gloomy. It is the government’s pump priming efforts on infrastructure that will save people from going hungry.
If we don’t see any improvement in the indicators above, prepare yourself for a bumpy ride. Save and earn more in any way possible. Postpone grand expenses like a grand vacation abroad or a brand new car. Chances are that we will be hit hard if external conditions do not get better. We have been a very passive economy as far as I can remember. Look out for the signs I have mentioned and monitor latest developments. DO NOT GET CAUGHT OFFGUARD. You have been warned.
