'Harsh' economic realities will test Marcos administration in 2023 – IBON

Metro Manila (CNN Philippines, January 22) — The administration of President Ferdinand Marcos Jr. will face harsh economic realities in 2023 despite its glowing portrayal of the country’s economy at the World Economic Forum (WEF), a think tank said Sunday.

RELATED: Marcos touts new investment pledges from Davos trip

IBON Foundation Executive Director Sonny Africa thinks these issues will mar the Philippines economy in 2023:

Misleading growth, high inflation, high prices

During the WEF, Marcos claimed a 7% growth rate in 2023. Last June, his economic team also projected growth rates of at least 6.5% annually until 2028. Africa disagrees with their figures.

“If their usual overestimates are any guide — and generously ignoring how wildly unmet growth was in 2020 — it is more likely that growth this year will be around 5% or even less,” he said.

Africa described rapid growth in 2022 as misleading.

“The real trajectory of the economy was emerging before the pandemic when growth constantly dropped from 7.1% in 2016 to 6.9% (2017), 6.3% (2018), and 6.1% (2019),” he added.

READ: ADB hikes 2022 PH growth forecast to 7.4%

Meanwhile, inflation hit 8.1% in December last year. Though Africa said it was projected to moderate between 2.5% and 4.5% this year, he’s not convinced prices will drop.

“Even if the middle estimate of 3.5% is achieved, this would still be higher than the 3% average in the decade 2010-2019 before the pandemic,” he explained. “However, inflation moderating only means that the general price level will be increasing at a slower rate, not that the prices of all basic goods will fall.”

“This is even if the price of specific commodities such as onions falls following the harvest season and pressure on monopolistic traders to lower prices,” he added.

Onions have seen a massive price spike in the past few months.

Marcos, concurrent agriculture secretary, previously told reporters that the administration was “forced” to import onions due to smuggling and insufficient local production.

Africa said that importation to lower prices was an emergency measure at best and would be damaging in the long term.

Employment

In 2019, IBON estimated that 29.3 million or 69.9% of total employment was just informal work; these were economic activities not covered or insufficiently covered by formal arrangements in law or in practice, according to the International Labour Organization.

Lockdowns increased the number of informal workers to 32.8 million in 2022, Africa said. When taken with the 2.68 million unemployed last year, about 73.2% of the labor force were either unemployed or in informal work.

“It is difficult to imagine how even weaker economic activity in 2023 could possibly be conditions for creating more formal employment, more regular work, and better incomes and earnings,” he said.

Corruption

Africa also said “the shadow of the Marcos kleptocracy is long and makes it awkward for the new administration to even just posture as being anti-corruption. There are already early signs of much more corruption in 2023 and the years to come.”

To him, the controversial, “re-engineered” Maharlika Investment Fund is a notable red flag of corruption.

He also described the controversial aspects of the 2023 budget as red flags.

“Confidential and intelligence funds of the president (₱2.3 billion) and vice president (₱650 million)... the ₱807 billion in ambiguous and opaque unprogrammed funds in 2023,” he said.

Debt, taxation

He forecasted that the national debt, which currently sits at a record ₱13.64 trillion, will balloon beyond projections in 2023.

To him, the admin’s economic managers were more concerned with taxation and “fiscal consolidation,” instead of providing cash aid and social services.

“The reason revenue generation is so meager is because the focus is on taxing poor and middle-class Filipinos who already have so little as it is — in particular, taxing their consumption,” Africa explained, referring to oil excise and value-added tax.

“The recent proposal for a consumption tax on luxury goods misses the point and a direct tax on billionaire wealth is much more desirable,” he added.