THE TRUE STANDING OF THE PHILIPPINE ECONOMYSubmitted by: Frances Katherine G. Miraflor

During the regime of Ferdinand Marcos the economy grew at a rate consistently slower than the years preceding and following him, destabilized by corruption. As we all know, Marcos embezzled billions of dollars from the national treasury and by the time of the People Power revolution, the economy had declined, falling severely below the growth of other nations in Southeast Asia. A severe recession in 1984 to 1985 saw the economy shrink, and perceptions of political instability during the Aquino administration further damped economic activity. Fidel V. Ramos managed to briefly uplift the economy during his term as president, posting one of the Philippines' highest GDP growth rates.

In 1998, the Philippine economy deteriorated again as a result of spill over from the Asian financial crisis, although not as much as other Asian nations, and a wave of natural disasters also dragged the economy down. Economic growth fell but recovered to a bit by 1999. President Joseph Estrada attempted to resist protectionist measures, and efforts to continue the reforms begun by the Ramos administration made significant progress. A major bank failure in April 2000 and the political disturbance following the impeachment and subsequent departure of President Estrada in the beginning of 2001 led to lower growth.

The administration under President Gloria Macapagal-Arroyo has pushed toward a faster and more rapid economic growth. In recent years, Arroyo's stance towards economic improvement since 2004 has seen the Philippines re-emerge as one of the growing economies in Southeast Asia. In 2004, the Philippine economy grew, beating most analysts and even the government's estimates. In 2005, the Philippine peso posted an appreciation rate of 6%, which was the fastest in the Asian region for that year. However, higher oil prices led to growth amounting to 5.1%. The Philippines is still faced with the challenge of generating income internally, as it has the third-highest rate of remittances from overseas in the world. During 2006, the economy posted a 5.4% growth, dampened by two typhoons which wreaked havoc on the agricultural sector. President Arroyo envisioned that by 2020, the Philippines would be a First World country.

However, considering our current situation, despite some favorable human development indicators, I believe the Philippines has not yet reached its economic potential. Our country was able to avoid the worst of the global recession, but economic growth slowed substantially in 2009. Our economy was further affected by the worst typhoon season in 40 years that devastated Metro Manila and the agricultural heartland of the country.

Signs of economic recovery manifested this year, but with poverty as our most significant problem, we are indeed having a hard time keeping pace with our East Asian neighbors. Poverty, combined with high income inequality, poses a serious threat to our country’s stability.

Despite a number of policy reforms, our country continues to face important challenges and must sustain the reform momentum to achieve and sustain the strong post-crisis recovery needed to spur investments, achieve higher growth, generate employment, and alleviate poverty for a rapidly expanding population. Without new revenue measures, sustained fiscal stability, I believe, will require more aggressive tax collection efficiency to address the severe under-spending in infrastructure and social services after years of tight budgets.

Also, the high ranking of our country on the international corruption scale highlights the need to strengthen state institutions. The consequences of the weak state are seen in a lagging economy and a degraded environment that precludes sustainable development. A strong state is needed both to establish infrastructure for the market to operate and to preserve the nation’s natural resources from further degradation by vested interests. But even more than creating infrastructures and regulating natural resource extraction, the state must assume responsibility for economic governance – the creative balancing of market operations and social conditions, including the promotion of civil society and its participation in the country’s economic life.