Last year’s economic growth was slower at 5.8 percent, compared to the 6.1 percent growth we achieved in 2014. Indeed, the 2015 performance was quite a disappointment because in the five years beginning 2010, whence the present administration started in the middle of that year, up to 2014, Philippine economic growth averaged 6.2 percent annually.
That was second only to China among all the countries in East Asia, if not in the world, which finally made the world to notice the Philippines, not as a basket case anymore that we were known for since the martial law period but as a newly emerging economy. From the lackluster performance in the first three quarters which averaged only 5.6 percent per quarter – 5.0 percent in the first quarter, 5.8 percent in the second quarter and 6.1 percent in the third quarter – the economy grew faster finally at 6.3 percent in the fourth quarter. This brought the overall growth for the year to 5.8 percent. Why did the economy slow down last year?
From the demand side, it really was caused mainly by last year’s large gap in growth in imports (11.9%) and exports (5.5%). In 2014, exports grew by 11.3 percent while imports grew only by 8.7 percent. A faster increase in imports over exports reduces our net exports and hence our economic growth. In 2014 our net exports was negative $70 billion. Last year, it deteriorated further to negative $294 billion. In fact, the rest of the demand side experienced improvement in their growth rates from 2014 to 2015, that is, consumption from 5.4% to 6.2%, government expenditures from 1.7% to 9.4%, and capital formation or investments from 5.4% to 13.6%.
From the production side, the culprit was agriculture which grew only by 0.2% in 2015 compared to 1.6% in 2014. Industry also experienced declining growth rate from 7.9% in 2014 to 6.0% in 2015 due to the decline in growth rates in mining from 4.9% to negative 1.3% and manufacturing from 8.3% to 5.7%.
It can be told as I did in my piece here two weeks ago that our good performance from 2010 to 2014 was industry-led on the production side and by investment or capital formation on the demand side. The industry did not do well last year.
Which means that if we have to grow faster again this year, we have to focus our efforts again on industry and also hope to continue growing our investments along with more government expenditures for big ticket projects that are already ongoing or about to take off to increase our local demand and to counter our deteriorating net export balance or net demand from abroad for our products.
And not only this year that we have to focus more on industry and investment but also in the years to come if we have to maintain our lead from hereon over our neighbors, including overtaking China if possible which vitality is now on the wane. From a high of 10 to 12 percent annual growth from the 1980s to the time of the last great recession in the last decade, China’s economic growth had slowed down now to 6 to 7 percent.
Personally, I also believe that 2016 will be a good year for the Philippine economy, in part because of the national and local election and secondly because the global economy, as projected by the World Bank and the International Monetary Fund, is set to also do better than last year which failed to meet expectation when 2015 started. In fact last year’s global growth slowdown was the main reason for the enlarged negative trade balance that we experienced last year that also brought down our overall economic growth rate for the year below 6 percent. What about Cebu and the Central Visayas? How will they perform this year? We did better from 2010 to 2014 when the Cebu-led Central Visayas economy grew by 9 percent annually, the fastest among the 17 regions in the country.
We did it then and I see no reason why we could not do it again this year and thereafter. In the last five years up to 2014, for every one percent growth in the national output, the region would grow by 1.4 percent. Based on this and the 5.8 percent GDP growth last year, I would say that the region would have grown by 8.3 percent more or less last year. And hopefully, even much higher this year. Will the country’s GDP growth really not drop in 2016? It may or may not but let us put in mind that although both the IMF and WB estimates showed declining world GDP growth rate from 2014 to 2015, both also projected higher growth rates this year. Our economy grew on average by 6.2 percent in the last five years before 2015. Based on this, there is also no reason why we could not surpass last year’s somewhat disappointing 5.8 percent growth.
Again more so because of the election. The fact is that the years when we were doing good economically in the past was also punctuated by the holding of elections in those years. At least that happened in 2004 where the economy grew by 6.5 percent, 2007 by 7.2 percent, 2010 by 7.6 percent, and 2013 by 7.2 percent. So, why not this year which is also an election year? Remember that one side of the economy is demand. Election provides that with the massive amount of money to be spent by the candidates and the government itself as usually happened in the past. Then there is the multiplier effect. But that’s another story.