By Daniel Moss
The Philippines is having the kind of recovery that would make any emerging-market star envious. After a tough pandemic and deep recession, the economy will outpace many of its neighbors this year and leave China — once the gold standard for rapid expansion — in the dust. Whoever wins the presidential election in a few days will inherit a country poised for better things.
If only it were that simple. Bullish growth forecasts mask serious vulnerabilities apparent at the ground level. The contraction that followed the outbreak was the biggest in peacetime and has left deep scars. China, the nation’s biggest trading partner, is struggling to shore up growth at home — a troubling development for everyone in Asia. Infrastructure, a big priority of outgoing Philippines leader Rodrigo Duterte, is easing some bottlenecks but has a long way to go. Inflation is marching higher and interest-rate hikes loom. Many citizens still think the best way to make a living and support their families is to pack their bags and go abroad.
Top-line economic numbers are indeed worth celebrating. Gross domestic product is projected to expand 6.5% this year, according to the International Monetary Fund, well in excess of Asia overall and exceeding the average for Southeast Asia. The government says growth may reach 9%. After rolling lockdowns for almost two years, Filipinos are increasingly out and about: It’s hard to get a table at cafes and bars in the Greenbelt area of central Manila. Traffic is again clogging the streets. Social distancing is non-existent. You can also see shops boarded up, casualties of Covid-19. Nevertheless, officials won’t be “fighting pandemic fires,” Citigroup Inc. said in a note.
How much of this hangs in the balance with Monday’s ballot? The economy, surprisingly, hasn’t been a major pressure point: Ferdinand Marcos Jr., who leads in opinion polls, has been stressing a vaguely defined idea of national unity and continuity with Duterte. (The president’s daughter is running to be his deputy.) His main challenger, incumbent Vice President Leni Robredo, has been emphasizing governance issues, a not-so-veiled reference to the cronyism and autarky of Marcos’s late father, who plundered the treasury and racked up record debts during his dictatorial rule in the 1970s and 80s. The elder Marcos left the economy in ruin when he was driven from office in 1986. Robredo’s supporters decry the prospect that this family returns to the presidential palace.
Marcos, known as Bongbong, hasn’t spoken in great detail about his economic plans. Both he and Robredo back the substance of Duterte’s “Build, Build, Build” public-works agenda. Each is likely to appoint technocrats and respected managers to key finance roles. While the fine print may differ, both want to consolidate the recovery, bolster health care and boost employment conditions, according to Citi.
China offers promise and peril. About a dozen Beijing-backed infrastructure initiatives are in the pipeline. Duterte came back from a 2016 trip to meet President Xi Jinping armed with investment commitments, seemingly in return for backing away from the Philippines’s historically intimate ties with the U.S. (It’s a former American colony.)
One signature projects is a bridge in central Manila that was recently opened. It’s hard to miss China’s influence. The base of the crossing is emblazoned with the flags of both countries. A banner trumpeting, “China aid for shared future” flutters in the breeze. All very shiny and new. But is it a white elephant? The structure, formally known as the Binondo-Intramuros Bridge, was plagued by delays. Few vehicles were using it mid-morning Thursday. Workmen still hammered away.
Then there is the country’s best known, and most lucrative, export: overseas foreign workers. These include nannies in Hong Kong and Singapore, merchant seamen, construction workers and airline staff in the Middle East and the Americas. Their remittances usually account for about 9% of GDP and have for decades been a reliable source of capital inflow, as well as a financial lifeline for millions of families. The pandemic hasn’t been kind. Remittances tumbled in 2020, a rare decline, but got a bump last year. They are forecast to grow 4% in 2022 and the following year, down from 5.1% in 2021.
Covid shows how the tap can be turned off, quickly. “Let’s hope and pray,” said Emmanuel Morales, who recruits for ship staff on what’s now a largely deserted street near Rizal Park in central Manila. It was buzzing during a visit I made in early 2020. The sign Morales held up showed numerous vacancies on oil tankers and container ships. Pre-Covid, he would handle about 20 applications a day. These days, he is lucky to get one. The agent next to him played Candy Crush on his phone listlessly.
Miracles aren’t a sound substitute for good policy. The next president will be the beneficiary of a recovery that’s got some momentum behind it. Whether 6%-plus growth is a sugar rush after a crippling pandemic slump or a return to more normal programming, it won’t paper over all flaws in management of the archipelago. The country’s new leader will need more tangible goals than quarterly growth. By all means build. But wisely.
Daniel Moss is a Bloomberg Opinion columnist covering Asian economies. Previously he was executive editor of Bloomberg News for global economics, and has led teams in Asia, Europe and North America.
© 2022 Bloomberg L.P.
