1 month ago
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The three quick reasons for this argument are: election cycle growth, low base growth and declining unemployment and inflation. The former refers to either a high growth the previous year is retained in election year, or election year has higher growth than previous year. Recent election years were 2013, 2016, 2019, 2022; then this coming May 2025.
The base effect growth refers to a low base and low growth the previous year often leads to higher base and higher growth the next year. Here are the numbers.
Election cycle growth
In 2012 and 2013, the Philippines has flat high growth of 6.9 and 6.8 percent respectively. Other neighbors have opposite result, Indonesia from 6.0 to 5.6 percent, Malaysia from 5.5 to 4.7 percent, Thailand from 7.2 to 2.7 percent.
In 2015 and 2016, the Philippines grew from 6.3 to 7.1 percent while Vietnam decelerated from 7.0 to 6.7 percent, Malaysia from 5.0 to 4.5 percent, Japan from 1.6 to 0.8 percent.
In 2018 and 2019, the Philippines has another flat high growth of 6.3 and 6.1 percent respectively. Many neighbors have deceleration: Malaysia has 4.8 and 4.4 percent, Singapore has 3.5 and 1.3 percent, Thailand has 4.2 and 2.1 percent. China has 6.7 and 6.0 percent, Korea has 3.2 and 2.3 percent, Japan has 0.6 and -0.4 percent.
And in 2021 and 2022, Philippines grew from 5.7 to 7.6 percent. Further recovery from horrible economic contraction in 2020 also contributed to this high growth, aside from being an election year. Several neighbors have opposite results: Singapore has 9.7 and 3.8 percent, China has 8.4 and 3.0 percent, Korea has 4.6 and 2.7 percent, Japan has 2.7 and 1.2 percent.
So there is reason to be more optimistic in 2025 than 2024. People and politicians withheld spending and saved last year, and will spend higher this year, particularly in official campaign period mid-February to early May.
Low base growth
The clearest example of this is from a contraction of -9.5 percent in 2020 to 5.7 percent growth in 2021, then 7.6 percent in 2022. Before that, a very low 1.4 percent in 2009 then 7.3 percent in 2010; also 3.9 percent in 2011 then 6.9 percent in 2012. The contraction in 2020 was the worst economic performance in Asia, and the worst in Philippine economic history since post World War 2. That is how dictatorial the Philippines lockdown in 2020 was compared to lockdown policies of many countries in the world.
Household consumption constitutes 73 percent of GDP. In 2024, it grew only 4.8 percent, low base and low growth, while the average growth from 2012 to 2019 prior to lockdown was 6.2 percent.
Investments or gross capital formation constitutes 22 percent of GDP. So household consumption plus investments constitute 95 percent of GDP. If investments will continue its average growth of nine percent in 2022 to 2024, and if household consumption will grow by at least 5.5 percent this year, these two can significantly pull up overall GDP growth to 6.0 to 6.5 percent. The growth target by the economic team in 2025 is achievable.
Declining unemployment and inflation
Last week the Philippine Statistics Authority (PSA) released the labor data for December 2024, it was another low 3.1 percent of total labor force. So the full year January-December 2024 unemployment rate was only 3.8 percent – an all-time low since the 80s or even earlier period. Another indicator of good economic stewardship by the economic team and other agencies in attracting and keeping job-creating investors and entrepreneurs.
Also last week the PSA released the inflation data for January 2025, only 2.9 percent. Philippine inflation declining from 5.6 percent in 2022, 6.0 percent in 2023, and 3.2 percent in 2024.
To summarize, these four factors will further support my contention that a 6.0 to 6.5 percent growth in 2025 is achievable: (a) low unemployment rate momentum, meaning more people have jobs and spending power; (b) deceleration of inflation in 2024 and January 2025 that will inspire more consumer confidence this year; (c) low base in household consumption in 2024; and (d) high election spending in the first two quarters this year.
And lastly I will add that energy prices this year will stabilize at low prices mainly because of Trump’s drill baby drill policy. Oil, LNG and coal production and exports by the US will further rise, helping depress their global prices, and translated to lower energy and electricity prices domestically.
