RP economy: Sound but hollow

Although it seems unbelievable that the Philippine economy has been going strong lately, financial analysts would readily impart their approval, however, despite its good performance, the Philippine economy has been regarded as a “hollow” economy.

Hollow because the country’s economic backbone is highly anchored on non-permanent investments and financial flows such as remittances from Overseas Filipino Workers, tourism revenues and BPO investments.

The country has considered the OFWs as the “unsung heroes” as their dollar remittances have strengthened the monetary muscle of the Philippines, thus the appreciation of the Philippine currency marked its all-time-high value versus the US dollar starting in 2007.

Meanwhile, the growth of Business Process Outsourcing (BPO) investments fueled the growth of employment rate in the country.

But these BPO investments do not promise a long term stay in the Philippines, as most of them hire contractual and seasonal workers and are occupying rented buildings.

These investments can go anytime.

Dollar remittances by OFWs are also unpredictable. Value of remittances can not be predicted as most OFWs are also contractual workers outside.

Tourism revenues are also volatile.

However, business leader Francis O. Monera said the local business sector believes that the Philippines is on its way to sound economic recovery, and in fact indicators have already shown.

He said the Philippines’ economic performance is anchored on certain strong economic fundamentals.

Monera, who is also the president and chief executive officer (CEO) of Ayala Land affiliate Cebu Holdings Inc. (CHI) said that there are sound indicators that showed the economic recovery of the Philippine economy.

These are the low interest rates, controlled inflation rate, real estate and construction boom, upbeat tourism, among others.

However, he admitted that the only “gray” area that the Philippines should also seriously look into is the exchange rate that has badly hit exporters and the OFW families.

“But, imagine if we don’t have strong peso, with the oil price hike? It would have been another problem,” Monera said.

While the local economy and local businessmen especially the importers and retailers are enjoying the good purchasing power of the Filipino market boosted by the OFW remittances, the export sector is calling for help.

“In any market, there will always be—losers, and gainers. It’s a matter of how to take advantage of the given opportunity,” Monera said, who is also the president of the Cebu Chamber of Commerce and Industry (CCCI).

Banker Prudencio Gesta also said that good indication for a “recovering” Philippines is the stock market performance, saying the confidence level of investors is up, while the Philippines has more money now to settle its international obligations.

Businessman Teodoro Locson for his part said that the Philippines could have a strong economy rather than perceived to have a “fragile” economy if OFW families will be encouraged to use their monthly allotment wisely, like putting extra cash to small business.

Promoting entrepreneurship to OFW families could trigger more economic activities and cash flow circulation.