Vietnamese set to get richer than Filipinos this year — IMF
MANILA, Philippines — Vietnamese are poised to become richer than Filipinos starting this year, in another direct consequence of the pandemic and how the two governments have addressed the health crisis differently.
Backed by sustained economic growth, Vietnam’s per capita gross domestic product would hit $3,497.51 to overtake the Philippines’ $3,372.53 under current prices, latest projections from the International Monetary Fund (IMF) showed.
GDP per capita divides the value of economic output with the population. It is typically used to measure how economic wealth is distributed among people.
That Vietnam is overtaking the Philippines in GDP per capita this year hits the economy like a double whammy. The Duterte administration targeted to elevate the economy to middle-income status this year, only to get derailed by the still lingering coronavirus that sapped both consumer and business confidence.
Worse, if IMF estimates are to be believed, Filipinos’ income is unlikely to catch up with that of the Vietnamese in the next 5 years. By 2025, Manila’s $4,805.84 per head is seen lagging behind Hanoi’s $5,211.90. This, in turn, may reflect serious consequences on poverty levels, which government had said may rise because of the crisis.
For analysts, it all boils down to how effective the pandemic response is. “Vietnam responded very well to the pandemic and was able to keep growing even if at a slower rate. In contrast, the Duterte administration’s poor and still tepid response has caused the worst economic collapse in the country's history,” said Sonny Africa, executive director at IBON Foundation, a think tank.
Acting Socioeconomic Planning Secretary Karl Kendrick Chua did not respond to request for comment.
Africa said Vietnam surpassing the Philippines should not be at all surprising since the country has been at the “cusp” of doing so for years now. What it apparently took to finally close the gap— and even go higher— was the diverging fates of the two economies this year.
As per IMF forecasts, Philippine economy is seen shrinking 8.6% year-on-year in 2020, the fastest since democracy was restored in 1986. In contrast, Vietnam is forecast to grow 1.6% annually.
Ruben Carlo Asuncion, chief economist at UnionBank of the Philippines, said faster virus containment all made the difference for Vietnam, which recently announced arresting a second wave of coronavirus infections and lifting a three-week lockdown last week.
“Even before COVID-19, Vietnam, I believe, has been on a higher growth trajectory than the Philippines, and it cannot be denied that Vietnam has done a better job so far in containing the coronavirus compared to the Philippines,” he said in a text message.
Beyond public health, Calixto Chikiamco, president of Foundation for Economic Freedom, a group of former finance secretaries, the Philippines was left behind by its slow-moving reforms such as opening up the economy to more foreign investments.
“Vietnam has more capable institutions, has been very aggressive in liberalizing rules for foreign investment, and has adopted the correct strategy of focusing on improving agricultural productivity, light manufacturing growth and exports,” he said in a text message.
“Their exports are 100% of GDP while ours is only about a third. Cheap food enables them to give reasonable wages with high purchasing power, powering growth in their manufacturing sector,” Chikiamco added.
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