Iffy 2016

This year will be an iffy one, marked by numerous uncertainties, both external and internal. It would certainly be enough to mark 2016 as a heart-thumper, especially when perusing the long list of challenges on both the international and national setting.

On the global front, the world is yet unsure of seeing a recovery, more so now that China is in the throes of uncertainty. In fact, the World Bank has downscaled its global growth forecast to 2.9 percent, down from its earlier projection of 3.3 percent.

While the US is showing encouraging signs of faster recovery, this would not be enough to offset the anticipated further economic slow down of China, even as the world’s second largest and influential economy tries to correct its past growth surges to something at more sustainable rates.

More threatening about China would be its balancing act in trying to restructure its expansive investments in the past to fuel economic growth. This is now being challenged by slower growth, the slowest pace monitored since 1990.

Even the International Monetary Fund has given a similar reading of 2016, noting the growing health of such economies as Europe and Japan even at substantially still lower levels. This is pretty much the same reading for emerging markets.

Uncertainties

Other uncertainties, perhaps beyond what we humans can prepare for, are the challenges that come with changing climates and aggravating wars. The recent world summit on climate change has been seen as a relative victory, but it will not help to mitigate the worst of El Niño for most of the year, or the forecasted La Niña towards the end of the year.

The fragile state of the world economy is not being helped at all by aggressions – invasions, repressive governments, or extreme ideologies – that disrupt economic activity and weigh down further to create more drag to dampen world economic growth.

It’s election year

On the local front, the biggest uncertainty will most likely be with the political landscape. A change in the top leadership, Philippines-style, is always wrought with varied insecurities, best amplified by the business community’s voice.

These concerns really seem understandable – actually, predictable – especially now that the country has made so much progress with its economy under a political environment that has gained a fair measure of credibility and respect.

The outcome of the May elections will definitely define whether the Philippines will be able to sustain the growth it has earned over the last decade, which has been almost like a miracle given all the upheavals created by the financial crisis of 2008.

It will be interesting to know if our strong macro-economic fundamentals, prudent financial management, and the steady and consistent inflow of remittances will be enough to keep investments coming in to maintain economic growth when the new political leadership comes in after the elections.

Beyond control

One other big threat to the Philippines, for sure, will be the unpredictable weather and the disasters that are beyond human control. Droughts, floods, and super typhoons with growing intensity and frequencies have certainly cost us much more than we could spare.

For a nation that has more than half of its population still living in poverty, the cost of Mother Nature’s catastrophic tantrums only drives deeper the wedge that divides the rich from poor Filipinos. Not only is there a disruption in livelihoods; those affected and set back in their standard of living by a few notches lower are those that take longer to get back on their feet.

Country’s food supply

Then there is the dire consequence on the country’s food supply that triggers – even if temporarily – a higher cost in agriculture and livestock produce. The disruption in the normal supply of rice, fish, vegetables, and other farm products sets off a price increase that burdens more those directly affected by the tragedy.

Food security, on the other hand, is not only affected by weather disturbances. The lack of confidence in being able to provide food for the nation’s 100 million without resorting to importation is the product of years of neglect in nurturing the agricultural sector.

With the pressure to break down tariff barriers for all products, at least within Asean, becoming all the more intense in the next couple of years starting this year, the chances for resuscitating our farmlands to become more productive is almost dim.

Our farmers and fishermen will find it doubly hard to compete against the farm products our neighboring countries will produce, thanks to their early investments to protect their own food production capability.

Remittances blip

Last year in August, for the first time in 12 years, cash remittances by Filipinos working abroad fell, even if just slightly lower. This situation bears watching since the monies sent home by our overseas countrymen are the basis why consumer spending has been exceptionally strong over the years.

Of course, this may just be a temporary blip on the radar. After all, we are seeing the continued strengthening of the US economy, and the apparent healing of Japan and Europe. All three are strong sources of Filipino overseas employment opportunities.

There are other challenges that should be monitored, but they pose lesser harm. Crude oil prices continue to drop, and while this is a generally welcome development, this also means lower government revenue collections from fuel products.

The peso is also losing its buying power against the US dollar. Filipinos who receive remittances from abroad are happy; so are our exporters. But we need to pay more for imports, which by the way, are growing faster than exports.

If there is something we can be sure of in 2016, it is that election spending during the first trimester of the year would bolster economic growth. This, coupled with the planned rise in infrastructure investment, bodes well for the country – even if for a brief moment.

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