Speaking Out
By Ignacio R. Bunye
In a recent speech delivered before the Management Association of the Philippines (MAP), Jaime Augusto Zobel de Ayala, Chairman and CEO of Ayala Corporation, highlighted the imperative to bridge significant disparities in healthcare, infrastructure, education, and agriculture as a means to propel the Philippines towards achieving upper middle-income status. This ambitious objective aligns with the national vision of attaining a per capita income of $11,000. Examining the government’s budget priorities for 2024 reveals a strong commitment to education, infrastructure, and healthcare.
The COVID-19 pandemic underscored the vulnerabilities within the healthcare system, leading to recurrent lockdowns, particularly in metropolitan areas. Acknowledging this, the Marcos administration has recognized the significance of establishing specialized healthcare centers in key regions to ensure widespread access to high-quality critical healthcare services.
While the shift away from private-public partnerships in infrastructure projects initially hindered progress, it is now paramount to encourage more of these collaborative endeavors. Doing so could enable the Philippines to catch up with nations like Indonesia and Vietnam, which have attracted substantially higher foreign direct investments.
The Philippine Business for Education (PBEd) has aptly stressed the urgency of addressing the five- to seven-year gap in reading, science, and mathematics proficiency among young Filipino learners. Although the Department of Education (DepEd) has initiated various programs, it grapples with challenges such as teacher training and a chronic shortage of classrooms. Nevertheless, it is actively working on improving curricula and teaching materials.
Agriculture, which has lagged behind in recent years, is experiencing renewed optimism with the appointment of a new Secretary of Agriculture renowned for success in large-scale fishing. Providing comprehensive support to farmers and fisherfolk in terms of equipment and logistics is imperative, as is promoting farming as a viable livelihood, especially considering the aging demographic of Filipino farmers.
In pursuit of the national vision, “AmBisyon Natin,” which envisages a prosperous, predominantly middle-class society by 2040, there is an urgent need to nurture a nation of empowered and mobilized dreamers. Achieving this ambitious goal necessitates unwavering commitment, dedication, and enthusiasm from all sectors of society. With the right strategies and collective effort, the Philippines can make substantial progress towards achieving equitable prosperity and enhancing the quality of life for all its citizens.
BSP to retain current interest rates
The recent announcement by the Bangko Sentral ng Pilipinas (BSP) to retain its current interest rates at its forthcoming February meeting has sparked considerable discussion in financial circles. BSP Governor Eli M. Remolona, Jr. has made it abundantly clear that there are no immediate plans for a rate cut, a stance that is well-founded given the present economic circumstances.
A central driving factor behind BSP’s decision is the persistent worry regarding inflation. The projected inflation rate for 2024 remains above the BSP’s target range of 2-4%. Consequently, any reduction in interest rates at this point could potentially worsen inflationary pressures, which the BSP has been diligently trying to manage. To combat inflation, the Monetary Board had previously raised interest rates by a substantial 450 basis points between May 2022 and October 2023, ultimately reaching a 16-year high of 6.5%. It is imperative to maintain these rates to ensure that inflation stays within acceptable limits.
Additionally, there are several external factors that support the BSP’s decision. Escalating tensions in the Red Sea and the prolonged El Niño weather phenomenon are seen as potential risks that could impact the inflation outlook. The ongoing attacks by Houthi militants on commercial shipping vessels and the continuation of El Niño have the potential to disrupt the economy and push inflation upwards.
Despite some optimistic indicators, such as a projected decline in inflation for January, uncertainties in the global economy, particularly concerning China, warrant caution. A slowdown in the Chinese economy could have substantial consequences for the growth prospects of the Philippines. Given China’s status as a major trading partner and source of investments, an extended economic slowdown there could adversely affect the Philippine economy.
Furthermore, a slowdown in China could have repercussions on trade, investments, and tourism in the Philippines. Governor Remolona’s suggestion of diversifying trade and investment partners is a sensible strategy to mitigate the risks associated with excessive reliance on a single partner.
The BSP’s choice to maintain current borrowing costs is a prudent step in light of evolving inflation risks and uncertainties in the global economic landscape, notably in China. Keeping policy settings tight is crucial for maintaining stable prices and economic resilience. The move towards diversifying trade and investment partners aligns with the need to shield the Philippine economy from external shocks. The BSP’s cautious approach is commendable and is in harmony with the overarching objectives of stability and long-term growth.
####
