THE economic slowdown should serve as a test of our capability to surmount the difficulties facing us these days.

I am referring to the not-so-good news that our economic growth—as expressed in terms of gross domestic product (GDP), or simply the total value of goods and services we produce, excluding income from abroad—had slowed down to 5.2 percent in the first three months of 2008, compared with 6.9 percent in the first quarter of 2007.

This report has prompted economists and analysts, both from the government and the private sector, to scale down their growth forecasts for the whole year.

The Development Budget Coordination Committee, which earlier set a GDP growth range target of 6.3 percent to 7 percent, reduced it to 5.7 percent to 6.5 percent to take into account the first-quarter performance.

Some experts from the private sector are predicting as low as 4 percent, but I think this is unrealistically pessimistic.

As a matter of fact, bankers, whose business and profession make them the most conservative players in the economy, are not so pessimistic.

One has been quoted in the news media as saying “the first quarter was a bad quarter.” He cites the rare combination of high oil prices and high food prices as the main factor behind the slowdown, not because of high prices, per se, but because it triggered a sort of hoarder’s attitude among suppliers and producers and a sort of panic-buying mentality among consumers, effectively distorting the law of supply and demand.

So, what I would like to point out here is the good or positive side emerging from the current economic situation. I remember that we went through the 1997 Asian financial crisis. That was really bad for us because it hit us when we did not have adequate resources to fall back on, and economic growth was fragile and narrow-based, limited to the real-estate industry.

In contrast, the 7.3-percent GDP growth in 2007, which was a 31-year high, was broad-based. All major sectors of the economy contributed to the expansion. More than $14 billion of remittances, mostly from overseas Filipino workers (OFWs), pushed the peso to its strongest position in recent years, although it also had a downside—it hurt exporters and the families of OFWs.

Despite predictions that remittances will decline this year because of the slowdown in the United States and other countries, remittances grew by 12 percent in the first quarter to reach $2.8 billion.

We are still on track to breaching the $16-billion remittances mark this year because we continue to send workers abroad, and many of them are landing in highly paid jobs.

There is very little we can do about petroleum prices because we still import most of our requirements, but on the positive side, high prices encourage prudent spending, which, in the end, will reduce our oil imports and, in turn, boost our foreign-exchange position. In addition, it serves as an incentive to boost the development of alternative fuel sources, such as renewable and indigenous biofuel.

Now, speaking of the real-estate industry, the boom that started in 2004 is still going strong, and I am confident the industry will continue to grow despite the global challenges.

There are several factors that combine to strengthen the property sector and keep it on the high-growth track. First, OFWs and Filipino immigrants and their remittances, which continue to provide demand for housing, coupled with the pent-up demand from the post-1997 crisis. Second, the flourishing business-process outsourcing industry, which continues to attract foreign investments. And third, the boom in the tourism industry. Some 1.11 million tourists visited the Philippines in the first four months of 2008, reflecting a 7.5-percent increase compared with the same period in 2007. They spent a total of $1.3 billion.

One advantage that the global slowdown provides us is that we are close to the tourist markets. According to statistics from the Department of Tourism, 20 percent of our visitors during the January-to-April 2008 period came from Korea. The United States was a close 19.4 percent, but I think many of the visitors from the US are immigrants—we can count on them to continue coming here to visit relatives or to take their vacations.

With respect to visitors from other countries, the rising airfare rates and cost of living may discourage overseas travel.

To our advantage, we are close to China and Japan, which are becoming the biggest sources of tourists. During the first four months of 2008, visitors from China accounted for only 5.7 percent of total tourist arrivals; Japan accounted for 11.6 percent. This means that we have barely scratched the surface of the Chinese tourism market, and still have a lot of potential from Japan.

I would suggest that, in addition to the already successful promotion programs of the Tourism department, we sell the Philippines as the cheapest place and the most beautiful country to visit.

Other positive factors that I believe will help us cope with the current global situation and sustain high economic growth are the following:

• The government expects to reach or exceed its revenue target of P1.09 trillion this year.

• The exchange rate, now at P44 to the dollar, is still far from the P55 to $1 that we experienced a couple of years ago, but it should raise the hopes of our exporters, besides increasing the purchasing power of OFWs and their families.

I would only ask that special attention be given to the plight of many of our countrymen as a result of the surge in inflation to 9.6 percent in May. According to a study by the Asian Development Bank, for every 10-percent increase in inflation, 2.3 million Filipinos fall into poverty.

I recognize that some measures are now being implemented or lined up, such as subsidies for lifeline power consumers and fuel discounts for public transportation. I believe the government should look for other ways to help our people survive the current crises. It is good that we are enjoying healthy revenue flow, part of which can be used to support these programs. In the end, it’s just the primary objective of taxes—for the benefit of the people.

Summing up, I look at our performance in the first quarter as a test of our capability to face challenges and stay on the high-growth track.

If we fail, then our performance in 2007, which is already being questioned by some economists, will be nothing more than a fluke. If we succeed, despite the odds, then we, as well as the investors, can gain confidence.

And so, let’s take the test and pass it. 

You may send your comments/feedback to mbvillar_comments@yahoo.com.

SHOULD we go nuclear?

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The Entrepreneur: A test for the Philippine economy

THE economic slowdown should serve as a test of our capability to surmount the difficulties facing us these days.

I am referring to the not-so-good news that our economic growth—as expressed in terms of gross domestic product (GDP), or simply the total value of goods and services we produce, excluding income from abroad—had slowed down to 5.2 percent in the first three months of 2008, compared with 6.9 percent in the first quarter of 2007.

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Happy Independence Day, Philippines! Long live the nation and the President!

This early, a group of Filipinos belonging to the Left-wing organizations, like Bayan, whose cells operate in the United States, are already finalizing plans for holding rallies and protests against President Arroyo when she visits that country for talks with President Bush. They call it a meeting of a colonial master and a puppet.