Six is the key number today as we await the official release of the GDP growth number for the third quarter of the year.
The economy grew by 5.5% and 5.4% in the first two quarters of the year, a little below the target set. The lower numbers are attributed to the delay in the enactment of the 2019 national budget. That delay caused the postponement of many infrastructure investments and other public expenditure items.
A few months ago, our economic managers announced a “catch up” plan for hastening public spending. This is expected to pull up our growth numbers. The final third quarter growth number will be a measure of the success of that catch-up plan.
Forecasts of the probable growth rate are largely within a narrow range. Business economists offered estimates of between 5.8% and 6.2%.
Any number officially released today will not be surprising. But growth in excess of the 6% will have tremendous psychological effect. It will be a strong signal that the economy is back on track after being slightly derailed by the frailties of our politics.
Ahead of the release of the official numbers, there are numerous positive indications. Notwithstanding our chronic trade deficit, due principally to our weak export capacity, the peso has gained strength the past few weeks. As it has over the past three decades, robust remittance inflows helped us raise the foreign currency we need for our vital imports such as oil.
Remittances help keep up domestic demand in the face of weaker trade. As of September Philippine trade in goods for the year amounted to $14.9 billion, representing a decrease of 7.5% year on year.
Of this number, exports account for only $5.9 billion or 37.5% of total trade. Imports accounted for $9 billion or 60.5% of total trade. The ambitious infrastructure modernization program drives up our imports even as some of our key exports declined of late.
For the month of October, the inflation rate climbed down dramatically to just 0.8%. That underscores the correctness of policies aimed at stabilizing our food supply, particularly the potentially revolutionary shift of our rice imports to tariffs instead of quantitative restrictions.
A low inflation regime invariably improves the growth rate numbers.
Agri growth
The good news is that our agricultural sector grew 2.87% in the third quarter. This is a dramatic reversal of the -0.87% contraction during the same period last year.
A positive agricultural performance will contribute greatly to pulling up our aggregate growth rate. Over the past few years, stagnation in agriculture served as a drag on our overall economic performance.
The bad news, however, is that the total value of our agricultural production is 3.6% lower than last year. That more or less cancels out the growth in productivity. The total value of our agricultural production is P395.3 billion.
Lower rice prices, no doubt, dragged down the value of our agricultural production. Nevertheless, improving productivity is a good development.
Agriculture is truly the problematic area in our economic development. Although it supports a much larger portion of the population, agriculture represents only 10% of national output. This is the reason why the bulk of poverty occurs in the rural areas.
For too long, our agricultural development was shaped by wrong-headed policies. Against the odds, we insisted on rice self-sufficiency as a goal. That distracted us from fostering higher value crops. Rice delivers the lowest value per unit of land.
We spent decades breaking up our farms in the name of social justice. That prevented our farm systems from introducing modern methods and investing in more efficient crop varieties.
The irony here is telling. In the name of “social justice”, we actually spawned more poverty.
Our agriculture remains poorly organized. While politicians, for the sake of the pork barrel, insisted on allocating money for “farm-to-market” roads, we never improved our logistics system to reduce spoilage and spillage that would have translated in better incomes for the farmers.
Today, well over half of fresh farms produced are spoiled before getting to the final consumer. That is an intolerable level of spoilage. It burdens urban consumers with higher prices for fresh fruit and vegetables. It reduces the income of farmers.
The shift to a regime of tariffs for rice trading produced dramatic results in retail prices of the commodity. That is only half the story.
While this might explain why palay production declined by -4.53%, it also caused an outstanding increase in corn production by 23.47%. If we are able to quickly build silos to store our grains and better conserve them through the introduction of modern technologies, we might be finally improving rural incomes.
Too bad we had already wasted hundreds of billions of pesos in “farm-to-market roads” and “multipurpose solar rice driers” (actually basketball court occasionally used to sun dry rice) the politicians wanted as a means to extract their pork. Whatever is collected from imposing tariffs on the rice trade should now be used to mechanize production, introduce more efficient drying technology and the procurement of new seed varieties. These are the real elements of a true revolution in our agriculture.
Whatever the final number on our nation’s growth is released today, it will be a good one.
For as long as we are able to maintain a growth rate in the vicinity of 6%, we will be a growth leader in a dynamic region of the world. Considering the general slowdown of the global economy, growth at that level will be indicative of economic strength.