SURPLUS (Philippine economy during the COVID pandemic)

The COVID pandemic and ensuing lockdown leading to a collapsing economy, as well as return of many
OFWs who had lost jobs and incomes, reversed the situation completely. Even if OFW remittances fell
significantly, imports collapsed with the economic collapse, much stronger than the export decline.
Thus, there arose a trade surplus instead of trade deficits. Furthermore, the large inflows of foreign
debt, including around $10 billion worth of foreign multilateral debts for the pandemic, flowed in. The
combined rise of a significant trade surplus and inflow of foreign debts overwhelmed the decline in OFW
remittances, increasing the international reserves substantially. Thus, the peso strengthened a lot from
March, 2020 till now. It is sad that some analysts, including Sec. Dominguez, claims that the strong peso
is sign of the confidence in our economy. In fact, it is the reverse, a sign of a collapsing economy with
drastic import declines and large inflows of debt money to address the COVID pandemic.

EMERGING MARKETS

Neglected Agriculture, No More

The Philippines has gradually shifted from an agrarian to an industrial and service-oriented economy.  In
1980, agriculture accounted for about one-fourth of the nation’s GDP, but that has dwindled over the
years to 9.3%. The agricultural sector includes forestry, hunting, fishing, the cultivation of crops, and
livestock production. The sector accounts for about 25% of the workforce. The main agricultural
products are sugarcane, coconuts, rice, corn, bananas, cassava (manioc), tapioca, pineapples, mangoes,
pork, eggs, beef, and fish.

The low level of productivity and slow growth in the Philippines’ agricultural sector has resulted in a high
incidence of poverty within the sector. The lack of government initiatives has been primarily responsible
for the decline of the agricultural sector, which has suffered from poor infrastructure and low levels of
investment. These factors were accentuated with the long seasons of drought that the country suffered. 

Fortunately, things seem to be changing as the government is now investing heavily in this sector. The
government is backing the Department of Agriculture’s (DA) programs in an attempt to improve food
security, rural income, and infrastructure. Some initiatives by the DA in a bid to improve the post-
harvest losses, while making products less expensive as well as stabilizing labor costs, are Farm
Mechanization, National Organic Agriculture, and Post-Harvest Development.

Then there is the World Bank-supported Philippine Rural Development Project, which aims to improve
rural infrastructure. Beyond these, a crop insurance scheme, which will cover the costs of devastating
weather phenomena, is being rapidly expanded by the government through Philippine Crop Insurance
Corporation. Given these and many more measures, the agricultural sector of the Philippines should
witness a spurt in its productivity and output in the near future.

GROWTH IN MARKET SHARE (Philippines Economic Update: Investing in the future)

 In 2017, the Philippines was among the top three growth performers in the region.
 The medium-term growth outlook for the Philippines remains positive but domestic risks are
more prominent.
 Higher real wages are essential to achieve shared prosperity and inclusive growth.
In 2017, the Philippines was among the top three growth performers in the region. Only Vietnam and
China did better. The Philippine economy grew from 6.9 percent year-on-year in 2016 to 6.7 percent
year-on-year in 2017. Growth was anchored in strong exports, while investment growth significantly
slowed and consumption growth moderated. The Philippines’ annual exports rose sharply in 2017 and
became the main engine of economic growth, while imports continued to grow by double-digits.
Investment growth slowed in 2017, following two consecutive years of rapid expansion, and climbing
inflation slowed real wage growth and contributed to a moderation in private consumption growth.

Sustained economic growth is likely to continue to contribute to poverty reduction.  Under the
assumption that the responsiveness of the poverty rate to economic growth follows historical trends,
the poverty rate, based on the lower middle-income poverty line of US$3.20/day, is projected to decline
from 27.0 percent in 2015 to 22.9 percent and 21.7 percent in 2018 and 2019, respectively, as economic
growth remains robust. These projections would imply a continuing trend of one million Filipinos being
lifted out of poverty each year. Factors that have been driving poverty reduction in the Philippines
include the movement of employment out of agriculture, a sustained inflow of remittances, and the
government’s conditional cash-transfer program.

ADVANCEMENT AND IMPROVEMENT IN TRANSPORTATION (Impact of Improved Transport

connectivity on income, education, and health: the case of the roll-on/roll-off system in the
Philippines)

RoRo- describes how products are loaded and discharged from a vessel.

We study the impacts of providing an efficient and affordable transport system within a country
through the experience of the Philippines. In 2003, the roll-on/roll-off (Ro-Ro) policy was
implemented to provide an integrated mode of inter-island transfer. We offer three analyses that
examine the effects of this policy at the household as well as the municipality level. Our first
analysis shows that agricultural households largely benefit from Ro-Ro port operation, as we notice
higher incomes for both agricultural and non-agricultural activities. Our results also suggest that the
island location of agricultural households relative to Ro-Ro ports does not hinder the gains from the Ro-
Ro policy. Meanwhile, our second analysis exhibits higher school attendance in municipalities near the
Ro-Ro ports, which we observe for both males and females. Interestingly, we observe the increase
much earlier in females than in males. Finally, our third analysis reveals lower household consumption
of alcoholic beverages and tobacco in areas near the Ro-Ro ports. Overall, the results of our
paper demonstrate several additional effects beyond economic growth of strengthening the physical
linkages between the local economies within a country. More importantly, it highlights the crucial role
of the transport system in a country’s socio-economic development.

TECHNOLOGY AND COMMUNICATION (Philippine economy to grow faster with technology)

A research fellow from the Philippine Institute for Development Studies (PIDS) posits that the Philippine
economy could grow faster by an estimated 10% if emerging technologies, knowledge and the
4th Industrial Revolution can be utilised to accelerate productivity.

At present and without fully utilising the existing technology, the economy is growing at about 6%, what
more if it did.
According to a recent report, if the country can overcome the barriers to adoption and adaptation of the
current technology and knowledge to improve productivity, then the country should be growing fast.

In order to take full advantage of the 4th Industrial Revolution, the country needs to hop onto the
bandwagon headed for the knowledge and technological frontier, in which the United States and
advanced European countries belong to.

The technological frontier being mentioned and tagged as being part of Industry 4.0 include 3D printing,
the Internet of Things (IoT), artificial intelligence (AI), robotics, Big Data, and cloud computing.

The expert underscored the need for the Philippines to invest more in research and development (R&D).

According to the benchmark of United Nations Educational, Scientific and Cultural Organisation
(UNESCO), about 1% of a country’s gross domestic product (GDP) is the suggested amount that should
be spent for R&D.

The country is spending only about 0.2%, or 1/5 of the suggested 1% of GDP for R&D.

Moreover, there is also a need to address hard and soft infrastructures as well as capacity development
of human resources and institutions for they are complementary factors to R&D investments.

Addressing them will improve the country’s readiness for the 4th Industrial Revolution. It must be a
whole package instead of being focused too much on one thing, neglecting the fact that they are all
connected.

Estonia was cited as an example of a country that managed to use technology considerably across
government.

It is trying to use and harness technology and with their economy growing fast, they may have proven
that potentials can actually become realised if concerned areas are invested on properly.

The areas that need to be invested on are information and communications technology (ICT), technical
areas and soft skills, which are skills that cannot be replaced with automation.

In addition to that, the Philippines should fully maximise its human capital, not just in the local setting
but also those who are staying abroad.

The expatriates, together with the science and technology professionals, should be encouraged and
enticed to come back to the Philippines and be more involved in projects that will benefit their own
country.

But the Government already has some programs in place to address that. On 15 June 2018, Philippine
President Rodrigo Duterte signed Republic Act No. 11035 or the “Act Institutionalising the Balik Scientist
Program”.

This law would give more incentives to returning Filipino experts, scientists, inventors, and engineers
who would share their expertise in the country.

A returning scientist can participate in the Department of Science and Technology’s (DOST) Grants-in-Aid
research and development made possible by the Balik Scientist Law.
A grant may be provided to the Balik (returning) Scientist and will be released through the institution
that will be hosting the implementation of the project.