Low inflation and unemployment, high growth and trade
May 8, 2025 | 12:00am
While the coming elections on Monday, May 12, is largely about personalities, economic issues also play a big part in campaign debates. I will discuss four issues as recent data released by the Philippine Statistics Authority (PSA) have been generally positive.
Inflation, unemployment, trade and GDP growth
Our inflation for April 2025 was only 1.4 percent, the lowest level since November 2019, good news. The average inflation for January-April period are: 4.0 percent in 2021, 3.7 percent in 2022, 7.9 percent in 2023, 3.4 percent in 2024 and 2.1 percent in 2025.
I like the statement issued by Finance Secretary Ralph Recto. He said in Filipino and my translation, “Despite the continued decline in inflation, we are not complacent. Government action continues to keep it low and ensure that each Filipino household will benefit from it. We will do everything so that affordable prices for basic necessities will continue.”
He added that “This lower-than-expected inflation for the month also provides more room for the BSP to further cut policy rates to help us further boost the spending power of Filipinos, drive in more investments, and grow the economy, especially amid rising global uncertainties.”
Economic Planning Secretary Arsenio Balisacan and Budget Secretary Amenah Pangandaman, who were both in Italy, also expressed elation from this significant decline in inflation, particularly in food inflation of only 0.7 percent.
Good weather contributed to this, it was still raining until March and April and hence, crop output was high. Also low electricity and oil prices, peso appreciation that made imported goods like oil and raw materials become cheaper.
Our unemployment rate for March 2025 was 3.9 percent, also good. The average unemployment rates for January-March period are: 8.2 percent in 2021, 6.2 percent in 2022, 4.8 percent in 2023 and 4.0 percent in both 2024 and 2025. Declining trend in unemployment and hence, good news.
Our exports for January-March were $18.2 billion in 2024 and $19.3 billion in 2025 or 5.7 percent increase. Same period, imports were $29.5 billion in 2024 and $32 billion in 2025 or 8.4 percent increase.
What is interesting is that in total trade (exports plus imports) also for January-March period, the share of China increased from $9.3 billion or 19.5 percent of total in 2024 to $11 billion or 21.5 percent of total in 2025. In contrast, the share of Japan plus US combined was 20.7 percent in 2024 to 20.8 percent in 2025.
Our GDP performance for the first quarter 2025 will be released later today. Recent Q1 growth rates were: -3.8 percent in 2021, 8.1 percent in 2022, 6.4 percent in 2023 and 5.8 percent in 2024. The average growth forecast by 15 economists in the quarterly BusinessWorld poll is 5.8 percent growth in 2025. Fair enough.
As I wrote in this column earlier, among the 53 largest economies in the world with GDP size at purchasing power parity (PPP) of at least $500 billion, the Philippines has the third fastest growth in both 2023 and 2024, behind India and Vietnam.
Among East Asians that have released their Q1 2025 GDP growth, here are the numbers: Vietnam 6.9 percent, China 5.4 percent, Taiwan 5.4 percent, Indonesia 4.9 percent, Malaysia 4.4 percent, Singapore 3.8 percent, Hong Kong 3.1 percent, S. Korea -0.1 percent.
In contrast with Europeans with Q1 2025 GDP data: Austria -0.7 percent, Germany -0.2 percent, Hungary 0, Italy 0.6 percent, France 0.8 percent, Sweden and Belgium 1.1 percent, Finland 1.2 percent, Portugal 1.6 percent. And these are contraction or low growth on already low base or low growth in Q1 2024.
Economic and political Implications of the above numbers
One, low inflation means consumer confidence will improve, household spending will increase and this will pull up overall GDP spending and growth. BSP should further cut its interest rate from the current 5.5 percent (peak of 6.5 percent until July 2024) to five percent or lower.
Two, low unemployment rate means many people have jobs, have spending power which again will help improve consumer confidence and raise household spending.
Three, high expected GDP growth in Q1 2025 of 5.8 percent or higher means both households and corporations are doing good overall. Not as good as Vietnam but better than many Asian neighbors, and definitely better than all European economies.
From these three indicators alone, I think the administration candidates can expect good performance in the elections on Monday.
On foreign policy which has become an election issue also, there is widening gap between administration policy of growing anti-China sentiment vs household and corporate preference for China products. The combined share of China plus Hong Kong in Q1 2025 is 26.5 percent of our total merchandise trade or more than one-fourth already. So the share of all other countries including the US, Japan, S. Korea, Europe, etc. is less than three-fourth of our total trade.
Meanwhile the economic team held a Philippine Economic Dialogue (PED) in Milan, Italy last May 6. The main speakers were Secretary Pangandaman, Secretary Balisacan, DOF Undersecretary and chief economist Domini Velasquez, BSP Assistant Governor Zeno Ronald Abenoja, and DA Undersecretary Asis Perez. It is one of the sideline meetings held by the economic team during the ADB Annual Meeting.
My unsolicited advice to the economic team is that they should do more PED in more European countries this year and the next. Especially in Germany, UK, France, Netherlands, Austria and Belgium. These economies have been crawling if not contracting for the past three years.
No comments:
Post a Comment