7.1% proof

A balikbayan friend who has lived in the US for 30 years was recently in Manila. The last time she visited here was in 2008. Although she still complained about the usual irritants like the airport, traffic, the road condition, the crime wave and the lack of discipline of Filipinos in general — she said there was something “different” this time around that she hasn’t quite figured out yet.

At the end of her one-month stay, during our despedida for her, she announced that she finally put a finger on what was unusual about the country this time around. She observed that, “Filipinos who are still living in the Philippines, like my relatives, my former classmates and colleagues and even the taxi driver, no longer envy those who live abroad like me. In fact, they’re all asking if I plan to come back and retire here. It seems that many are doing just that.”

She turned to me and asked, what triggered that change? Without hesitation I said “good governance.” Seeing the skeptical look around the table and the sudden drop in decibel of the animated pocket conversations, I knew I had spoken Greek to them. The usual rabid P-Noy detractors around the table immediately cocked-their-debate-guns in anticipation of negating any praise I might heap on the President.

Like wind-up robots, the tired litany of complaints against P-Noy and his Cabinet started pouring out. Not wanting to have a prolonged debate, I said, “If all that you are citing are true, how would you explain the 7.1% GDP growth in Quarter 3? That’s the highest in ASEAN, better than Indonesia, Singapore and Malaysia, and just a fraction less than China. That’s 7.1% proof of the effervescent Filipino esprit de corp, as strong and intoxicating as what you’re drinking.” With that, there was immediate ceasefire, and all arguments were put to rest for another future round.

How did we manage to defy expectations, surpassing our own forecast of 5%-6%? The Q3 performance was above Indonesia (6.2%), Malaysia (5.2%), Vietnam (4.7%), Thailand (3%) and Singapore (0.3%) and second to China (7.7%). GDP is the sum of all products and services created in an economy. A lower debt-to-GDP ratio means that the country has more resources to settle its debts. Latest data showed the debt-to-GDP ratio further dipped to 50.5 percent as of the first semester.

The Aquino administration has garnered 9 positive rating actions in the past two years, placing the Philippines neck-to-neck with Indonesia. The improved assessment of creditworthiness was based on the “healthy pace of growth, improving fiscal performance of the national government, stable banking sector and projected ability to keep a robust pace of economic expansion over the medium term...Despite the head winds from softening external demand, the Philippines has demonstrated considerable economic strength and fiscal resilience,” Moody’s said in a statement.

The S&P report noted, “The Philippines has narrowed its fiscal deficits, lessened its reliance on foreign savings, and rationalized the public sector. A more conducive political setting has replaced the turbulent and obstructionist environment that prevailed for well over a decade.” However, a weak fiscal profile and high interest burden on its public debt, due to a narrow revenue base and the large portion of expensive commercial debt still need to be addressed.

Aside from declining government debt ratios, DBS said the country has also enjoyed dwindling foreign liabilities “in part due to the strength of the peso.” It said foreign debt just accounted to 35.8 percent of total outstanding debt as of July, down from 39 percent in early 2011.

The national government has also been a prudent budget manager, with the deficit expected to fall to just 2.4 percent in 2012 and 2 percent of GDP in 2013. Last year, deficit-to-GDP ratio hit 2 percent of economic output. DBM’s Secretary Butch Abad and the economic team deserve the credit (no pun intended) for the impressive performance.

Our foreign reserves actually rose to a record-high of $80.8 billion as of August, despite the slowing of inflows into Asia. Many countries’ reserves actually stagnated or even declined. 

The Philippines is the only economy in the world that the International Monetary Fund believes will grow faster than earlier anticipated this year. The IMF had already raised its 2012 growth outlook for the country to more than 5 percent from its October forecast of 4.8 percent.

Achieving an investment grade is expected to lower borrowing costs and boost foreign investments to create more jobs. From being the “sick man of Asia,” Philippines is now touted as the “diamond of the region” this year. Finance Secretary Cesar Purisima said this was proof that “good governance is good economics.”

Good governance is a hefty concept that’s in the same league as sustainability, inclusive growth and Millennium Development Goals (MDG). Big words sound profound and imposing, but without comprehension, they’re dust in the wind. When you come down to brass tacks, good governance boils down to an honest leader who will not steal from the coffers and genuinely cares for the people. As has been proven, this factor alone has the single largest impact on the confidence that is palpable in the country and around the world. Indeed it is the best time to be a Filipino.

I remember another great man who knew the power of integrity in office. I thought there would never be another leader like the late Raul Roco, who actually measured the percentage of corruption and incompetence vis-à-vis, the debt ratio and lack of social services. He concluded that if corruption were eliminated, there would be an automatic positive outcome on the economy.

The Aquino administration is proving exactly that. We should make sure that the benefits of an upbeat economy flow down to the most marginalized and the poorest of the poor. This is what inclusive growth means. This is what a just and humane society means. Then we have verified, “Kung walang corrupt, walang mahirap.”

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