It has been nine years since the Asian meltdown, and the Asian economies have been gradually growing out of the recession since 2004, aided largely by the growth in China and the USA. The Philippine economy grew by 5.4% in 2005 and again by 5.4% in 2006. While not extraordinary by Asian standards, or compared to China's 11% growth in the past four years, it is respectable and has laid the base for higher economic growth.
With the respectable 2006 economic performance of the Philippine economy, the improving world and Asian economic prospects, especially with the moderating oil prices, it looks like the Philippines will even do better this year. The government budget deficit at less than P70 billion will be at a record low both in amount and as a percentage to GDP; the credit rating of the country might be upgraded by all the rating agencies during the year; the Philippine stock market has been booming since December with daily volume of over $100 million a day; the $14 billion inward remittances by our OFW's might reach $16 billion this year; export growth might still be double digit even if lower than last years 14% increase; a stable foreign exchange rate; and inflation will be in the 3% to 4% range.
There were a lot of positive developments going for the country in the past few months and these augur well for the economy and society. The low interest rates now prevailing will not only be good for the corporations and businesses, but also for the individual borrowers and households who will be paying less for their housing and car amortizations and other personal debts. There will be more liquidity in the financial system and credits will be more available. The banks and other financial institutions have cleaned up their books of the bad loans and assets during the crisis years, and are poised to lend more to businesses and consumers. This is already noticeable in the promotions for housing, car, and credit card loans. Add to these the recently approved P1.2 trillion government budgeted expenditures for 2007, then we can expect increases in consumer and investment expenditure during the year. I am inclined to agree with the upper end of the government and private forecast of the growth of the Philippine economy (GDP), which is at 7% over that of 2006 in real terms.
In terms of economic performance, Cebu has most of the time always outpaced the rest of the country. Due to its central geographic location, large middle and entrepreneurial class, world class seaport and airport, economic zones, tourist facilities, and exporters, Cebu enjoys an economy growing double digit in terms of Gross Provincial Product (GPP), in the boom years and suffered less during the Asian crisis years. The Cebu economy is more diversified than that of other provinces in terms of products and services. This is exemplified by Cebu's stepping into the service outsourcing, (call centers, transcriptions, etc.) next to Manila as soon as the industry moved to the Philippine. Earlier than this, was getting the semiconductor plants and other electronic manufacturers to locate in Cebu. So if the Philippines economy is going top grow at 7% in 2007, Cebu will most likely grow at 11%, which is what China has been growing in the past 5 years. There will be a CEBOOM - Part II which will start in 2007.
A double-digit economic growth for Cebu will have a tremendous economic impact as this will filter down to the lowest income class. As was shown in China, this magnitude of growth will trickle down even without a deliberate income redistribution policy. Looking at the number of big construction projects that started in Cebu in the last few months, (hotels, resorts, housing, and the expansion of SM and Ayala Malls), and the number of carpenters, masons, plumbers, electricians, and other workers who are working, the general employment figures in this industry are improving. As more property development projects start this year in Cebu, there will be a shortage of these kind of workers and we will have to get them from the neighboring islands. Duplicate this in the other booming sectors such as tourism, hotel and restaurants, call centers and other outsourcing services, and the employment situation in Cebu will really be at a record high. Inspite of the predicted slowdown in worldwide electronic demand, the economic zones' manufacturers will still grow, maybe at a lesser rate, but the shipbuilding and heavy metal construction of the Aboitiz Group will be a star performer this year.
A CEBOOM will also be felt in the neighboring provinces of Cebu, like Bohol, Leyte, and Negros, as the increased demand will mean more supplies coming from the other provinces in term of manpower, food supplies, and even electric power. Plus the overflow from some sectors such as tourism and outsourcing services will go to the outlying provinces.
What are and will be the hindrance and limiting factors to another CEBOOM? It will be the government, or more precisely the wrong initiatives, inaction, and bad governance. If the government fails to provide the infrastructure to support CEBOOM, such as adequate water, power, roads and ports, these will put a cap or ceiling on the economic growth. If the local governments make it difficult to open or operate a business in their locality, this will discourage the investors. If there is excessive leakages in the government expenditures, both national and local, due to graft and corruption, the impact of the government budgeted expenditures will be reduced.
I am 80% sure that CEBOOM will happen again starting this year, and will go on for the full cycle. The coming May election could reduce the growth, depending on its conduct and outcome, but at worst, will reduce it only by 1% to 2%. Cebu will still outpace the rest of the country in economic growth in the next five years.