One-Up for the "Cute Economist"

For months, we have been reading good news about the Philippine economy: how the country seemed to be “recession-proof”, Sec.Gary Teves being named as Best Finance Minister in Asia, strengthening of the currency, and the rebound in the local stock market.  Last Saturday, Philippine Daily Inquirer has on its headline something good about the current president.  After all, she’s still a fine economist.  Let’s read about it.

‘CUTE ECONOMIST’ *
Arroyo tops RP Presidents on economy—UA&P
By Vincent Cabreza
Inquirer Northern Luzon
First Posted 03:20:00 05/16/2009

MANILA, Philippines—Which of the Philippines’ most recent Presidents succeeded in strengthening the economy and has the chance of having his or her economic legacy appreciated by future generations?

Will it be the “the lawyer, the housewife, the general, the actor or the cute economist?”

President Gloria Macapagal-Arroyo, the cute economist, is the winner, according to economists from the University of Asia and the Pacific (UA&P) at a briefing hosted by the Bank of Commerce in Baguio City last Thursday.

Each President’s performance was assessed in the context of the historical environment in which they ruled, said UA&P professor Emilio Antonio Jr., who is also president of the Center for Research and Communication Foundation.

Ms Arroyo, who has often said that she would want to be remembered for her contributions to the economy, may well be right, gauging by the relatively good health of businesses in northern Luzon, according to economist Ramon Quesada, former director of the UA&P School of Economics.

Economy moves

Antonio said it was during Ms Arroyo’s watch that the Philippine economy “definitely moved on” after the crisis of the martial law years.

According to Antonio, Ms Arroyo should be credited for the Philippines’ improved income and spending balance and manageable inflation rate.

This was a turnaround for the country after it was “brought to great heights and then great depths” by the “lawyer,” the late dictator Ferdinand Marcos, in the 1970s, Antonio said.

The “housewife,” President Corazon Aquino, tried to restore the economy but did not succeed, Antonio said.

‘Lost to us’

The “general,” former President Fidel Ramos, a hero of the first EDSA People Power Revolution, pursued industrialization but the 1980s and the 1990s—when he and Aquino took power— should “already be considered lost to us” because these decades saw a dramatic financial decline for the country, said Antonio.

The “actor,” ousted President Joseph Estrada who was convicted for plunder, won election a year after the 1997 Asian financial crisis which brought havoc to world trade, he said.

Antonio said the reforms, attributable to the Arroyo administration, “are probably the roots of the economy’s strong points.”

He said the “blows from the global recession” did not knock out the country because of the reforms introduced in the aftermath of the Asian financial crisis.

Tight watch on spending

Antonio cited the fact that the country’s price environment has stabilized since after the time of Marcos.

The inflation rate shot up to an average 14.3 percent during the martial law years, pulling up interest rates to 14.4 percent, according to a comparative chart drawn up by Antonio.

The inflation rate tapered down to 9.8 percent during Aquino’s term, gradually declined to 8.2 percent under Ramos and 6.6 percent under Estrada, until it reached 5.5 percent today, equipping the economy with a moderate 7.7 percent interest rate, said Antonio.

Consequently, the buying power of the average Filipino grew from 3.2 percent during the Marcos regime, to 4.1 percent under Aquino; stumbled to 3.9 percent under Ramos; restored to 4.1 percent under Estrada; and finally to 5.6 percent under Arroyo, he said.

Doomsday

The figures from the Marcos-to-Estrada years were the lessons that compelled Ms Arroyo to apply a tight watch on spending that allowed the country to earn three months’ worth of cash reserves this year, Antonio said.

As for what is in store for the economy, Antonio said he foresees an “onslaught of doomsday pronouncements” because financial turmoil in the United States is not about to end.

“Politicians who are positioning themselves for 2010 will insist that we are on the brink of a big economic disaster,” he said.

According to Antonio, many economists subscribe to the conventional wisdom which states that when the US, a major trade partner, “sneezes, we catch pneumonia.”

But he said an internal review of businesses in the country would reveal that the problem is an erosion of competitiveness, weak employment generation and the private sector’s unwillingness “to bet on ourselves.”

“We should not blame the world,” he said.

Remittances to shoot up

Quesada said naysayers ignore the fact that the sustained remittances from overseas Filipino workers and Filipino migrants are expected to shoot up to P771 billion this year because of the improved peso-dollar exchange rate.

Antonio noted that the Philippines never caught the “recession virus” because the country’s troubles are shaped by “perceptions and fears.”

He said “asset markets remain jumpy due to bad sentiments [and] the effects of sentiments on spending and investment activities cannot be discounted.”

“Keep your cool,” he said. “Don’t lose your focus on business possibilities.”

*Philippine Daily Inquirer