The struggles of bouncing back
The World Bank has forecasted that the Philippine economy is seen to grow again in 2021 after experiencing a deep recession in 2020 with economic growth of 5.9% in 2021 and 6% in 2022.
Private consumption is seen to pick up as the government will slowly allow more industries to resume operations and revive jobs. But the world’s premier lender noted that the growth forecast in the Philippine economy will not happen by merely reopening of industries. Structural reforms such as improving the business environment, fostering competition, and strengthening resilience against natural disaster are needed to support the economic recovery and boost productivity growth in the long term.
Looking at these fundamentals, the Philippines cannot be considered as gravely deficient in terms of legislation. Existing laws have been passed by Congress and became laws years ago. The Ease of Doing Business and Efficient Government Service Delivery Act (RA No. 11032) has been in our statute books since 2018. Sadly, in a 2020 report, the Philippines ranked 95th out of 190 economies, with the country being in the last rank among the founding members of the Association of Southeast Asian Nations, with Singapore ranked as second, Malaysia 12th, Thailand 21st, and Indonesia in the 73rd place.
The Philippine Competition Act (RA No. 10667) has been in effect since 2014, but the Philippine market continues to be dominated by a select few companies owned by rich families leaving the rest of the business sector composed of struggling micro, small and medium enterprises (MSMEs).
The CREATE Bill recently passed by Congress and now waiting for the President’s signature is a silver lining for corporate businesses which have been grappling with the Philippines’ income tax rate which is one of the highest in the ASEAN region.
With the income inequality between the rich and the poor, the growth forecast by the World Bank is not expected to trickle down to the poor. The government must embark on more cash transfer programs for the poorest of the poor to help families living in poverty sustain their food and other daily necessities in the time of crisis.
Pre-election spending in 2021 for the May, 2022 national elections is also seen as an economic booster, thanks to our politicians who are saving up for their election bids next year. However, with the upcoming change in leadership in 2022, it remains uncertain whether the expected growth can be sustained in that year and onwards.
Lest we forget, many islands in the archipelago remain isolated with the imposition of stringent travel restrictions. As a result, economic activities are limited and will remain stagnant with the islands in isolation and the country’s borders still shut down. Rich countries are now in a frenzy to vaccinate the desired number of people in their population to achieve herd immunity so that they can reopen their economy. Like many other developing countries, the Philippines is at the tail end of this race.
By: Atty. Gregorio B. Austral, CPA