AN economics expert proposed the restructuring of the economy to make growth sustainable.
Guesting in SMNI’s “Business and Politics” program hosted by The Manila Times Chairman and CEO Dante “Klink” Ang 2nd, Ateneo de Manila University Economics Department chairman Prof. Alvin Ang said that while the economy “may have grown beyond expectations” last year, “we must understand we just went back to our pre-pandemic level of growth.”
Still, it is cause for celebration because “we achieved this faster,” Ang said.
“In addition, our fundamentals are indeed sound and OK; however, the structure has not changed in the last 20 years. The services may have led again but other important sectors, such as agriculture, have been totally left behind while the manufacturing sector has been stalled tremendously,” he said.
Data from the Philippine Statistics Authority showed that the country’s gross domestic product (GDP) grew by 7.2 percent in the fourth quarter of 2022, resulting in a 7.6 percent full-year growth.
Among the major economic sectors, industry and services posted impressive growths in the fourth quarter of 4.8 percent and 9.8 percent, respectively. Agriculture, forestry and fishing (AFF), however, shrunk by -0.3 percent.
“Fundamentally, the services sector contributed a lot, but it is not bringing everyone up, and right now the economy has very little local production at all,” Ang said. “The quality of the growth is what is questionable, because if we continue at our current trajectory, the speed that our economy is growing will definitely catch up on us.”
He said inflation has accelerated further, to 8.7 percent in January 2023 from 8.1 percent in December 2022.
The January 2023 inflation is the highest annual rate since November 2008.
Driving up inflation last January was the higher year-on-year rise in the index of housing, water, electricity, gas and other fuels at 8.5 percent, up from 7.0 percent in December 2022. This was followed by food and non-alcoholic beverages at 10.7 percent, up from 10.2 percent in December 2022.
“Right now, even if our income is growing, the costs of goods and services are also increasing. That means the only way to cushion those prices is that there needs to be a restructuring of the economy towards some sort of local production of goods and services that the population is mostly buying,” Ang said.
Local production must be given priority since it will allow the government to fight inflation and sustain economic growth, at the same time securing more food for the Filipinos.
“Currently, agriculture’s contribution to the economy is very low despite it being a major source of economic growth distribution,” Ang said. “This is basically telling you that this land will no longer be used for agriculture but will be converted to something else instead, like subdivisions.”
“It would have been all right if the land would also be used for high-value production, but that is also not something that the manufacturing sector has because they are skewed toward exports,” he said.
The country lacks “a strong local manufacturing sector, and the agricultural sector is way behind. We need to at least put something in these sectors in order to start solving these economic challenges,” Ang said.