Philippine 2017 economic performance and where we are now

Our Gross Domestic Product (GDP) posted a 6.6 percent growth in the fourth quarter of 2017.

With the GDP growing by 6.4 percent in the first quarter, 6.7 percent in the second quarter and the adjusted 7.0 percent growth in the third quarter, our economy grew overall by 6.7 percent for the entire year of 2017. It was good, but 2016 was better when it grew by 6.9 percent.

From the production side, industry, which grew by 7.2 percent, was the leading growth sector in 2017, followed by services with 6.7 percent and agriculture with 3.9 percent.

From the expenditures side, the 2017 growth was led by investment or capital formation which grew by 9.0 percent, followed by government final consumption expenditures with 7.3 percent and household final consumption expenditures with 5.8 percent.

Exports grew by 19.2 percent but this was cut down by imports which also grew by 17.6 percent, leaving only a 1.6 percent growth in net exports.

It can be said that exports will expand the GDP but imports will contract it.

In nominal terms, our GDP in 2017 amounts to P15.8 trillion at current prices or P8.7 trillion at constant 2000 price.

At an exchange rate of P50.8 to one US dollar (as of yesterday), our GDP amounts only to $311 billion.

This is a miniscule figure when compared to the estimated $88 trillion gross world product in 2017 or the US GDP which amounts to $19 trillion and China’s $11 trillion in nominal terms.

Had we maintained our exchange rate at P45.00 to one US dollar, our GDP would have been $351 billion.

Overall in the first seven years of this decade, our GDP has grown annually by 6.2 percent.

This is much faster than the 4.8 percent annual growth rate the country achieved in the first 10 years of the millennium. Assuming we continue to grow at 6.2 percent annually from hereon, it will take us about 11 years to double our GDP to $622 billion in 2028 and another 8 years in 2036 to reach $1.0 trillion.

Given our $311 billion GDP and population estimated at 104 million last year, our per capita income or per capita GDP would amount to $2,990 or roughly $3,000.

Had we maintained our exchange rate at P45.00 to a dollar, our GDP per capita would have been $3,511 or roughly $500 more.

To be part of the developed world, a country must at least have $12,000 in per capita income.

To be part of the developed world, we must double our current per capita income twice from $3,000 to $6,000 then from $6,000 to $12,000. How long can we do that?

The answer depends on how fast we grew our per capita income. Our growth in per capita income in turn depends on our GDP growth rate and population growth rate.

If beginning this year, our GDP will grow at 7 percent, the lower part of our 7% to 8% GDP growth target in our development plan, and our population also continue to grow at 1.7 percent annually, based on the result of the 2015 census, then our per capita income will grow at 5.3 percent annually.

At this rate our current $3,000 in per capita income will double to $6,000 in 13 years in 2030 and to $12,000 in another 13 years in 2043.

That’s 26 years of rapid economic growth which at 7.0 percent annually is really doable if we only adopt the right economic policies and act on them correctly.

Many of our neighbors, like Japan at first and then South Korea later, did just that which resulted in Japan fully recovering early its status as a developed country after their defeat in the last war and for Korea to become the second country after Japan to join the developed world by the 1980s when it hosted the second Olympic held in Asia.

For its part, Japan actually became part of the developed world before the end of the 19th century after industrializing its economy starting from the restoration of the Meiji Emperor in 1868 when the last shogun resigned his post.

For about 200 years before that, Japan under the shoguns was closed to the foreigners who came to exploit and colonize much of the Far East.

Japan when closed was not colonized but when US Commodore Perry came with his powerful black ships demanding a treaty to be signed, it found itself helpless to resist.

How did Japan join the developed world? They did it by seriously aping what the western countries were doing industrially and in almost all other facets of development, including their education and military tactics. The proof of its industrial and military power was tested when Japan won its 1895-95 war against China and 1904-05 war against Russia.

It was in the 1960’s after regaining much of its lost industries from the last war that Japan also hosted the first Olympic in Asia. For its part, South Korea, a colony of Japan before the last war, aped much of what Japan was doing with it’s industries with focus on export industrialization.

Now its China’s turn to become an industrial power. It started after the death of Mao Zedong and when Deng Xiaoping, his successor, adopted the free market system to replace its failed command system.

With that trick, China’s economy boomed since then until now. In 1980 China’s per capita income in nominal terms was only $309 or $310 in PPP or purchasing power parity.

In the same year, our per capita income was $752 in nominal terms or $1,052 in PPP. By last year, China’s per capita income was about $8,583 already in nominal terms or $16,624 in PPP while ours was only about $3,000 in nominal terms or $8,229 in PPP.

See what good economic sense can do? Can we?