Date
18 December 2017
The Philippines' aggressive infrastructure program has created millions of jobs. Photo: Bloomberg
The Philippines' aggressive infrastructure program has created millions of jobs. Photo: Bloomberg

Philippine economy: miracle or bubble?

Last July, the population of the Philippines hit 100 million. All babies born around that particular time were given five thousand pesos as “souvenir”.

This population threshold is considered a critical level for a country to build up its domestic market. Does it mean that the Philippines will develop quickly after joining the 100 million population club?

Right now, only 11 other counties have reached this population level. Among them, the United States, Russia and Japan are traditionally developed countries (the demographic trends of the latter two are declining sharply).

Other countries on the list — China, India, Indonesia, Brazil, Pakistan, Nigeria, Bangladesh and Mexico — are all emerging economies. Some of them are BRICS countries, while others are considered to have high development potential.

For those who look down on the Philippines, it’s hard to get optimistic given a number of some major issues the country is facing.

The reasons for the booming population are related to a failed family planning program, which in turn could be traced to economic and cultural factors as well as its Roman Catholic background. That many new-born babies are from poor families only increases the government’s burden.

Meanwhile, the proportion of HIV carriers is rising among the country’s teenagers. It further deepens people’s dependence on medical and welfare systems. Many Third World countries who had had a good start were slowed down by HIV. One classic example is Botswana in Southern Africa. Whether the Philippines will follow its path deserves our attention.

Despite such concerns, many economists remain optimistic about the Philippines.

Although President Benigno Aquino III is not very popular among Hong Kong people in view of the Manila hostage crisis, it cannot be denied that his government has made a lot of contributions to uplift the condition of his people. For example, his aggressive infrastructure program has created millions of jobs.

The Economist ranked the Philippines second in Asia in investment climate improvement last year.

In the past, the Philippines relied heavily on the export of unskilled and semi-skilled workers such as domestic helpers for foreign exchange. However, because of the improving economy and rising employment rate, many former migrant workers have decided to come home. In fact, the situation could lead to a declining supply of domestic helpers from the Philippines.

The butterfly effect could affect several developed Asian economies which highly rely on the Philippine domestic helpers, including Hong Kong.

As long as the Philippine economy continues to grow, the 100 million population — a huge source of workforce — is a precious resource. Currently, the median age of the Philippines is below 23, making it one of the world’s youngest countries. Compared to Japan’s 44, the Philippines has a lot of potential.

In addition, a domestic market of 100 million people can be a powerful engine for economic miracles.

Many describe the “Philippine miracle” as just a bubble amid the huge wealth gap and the intense class conflict. However, other emerging economies also suffer from similar problems. The Philippines’ potential is greater than those of Pakistan and Bangladesh, which are among the “Next 11” suggested by investment bank Goldman Sachs as having the potential to become the world’s largest economies in the 21st century.

A friend from an immigration consultancy firm once joked: “Immigrating to the Philippines is not a bad choice. Since the barrier is low, it is not hard to carve a niche for yourself, as long as you have the start-up capital.”

It seems that many domestic helpers have started their own businesses successfully after they went back to the Philippines.

Only time can tell whether the Philippine economy will become a miracle or a bubble.

– Contact us at [email protected]

CG

Associate professor and director of Global Studies Programme, Faculty of Social Science, at the Chinese University of Hong Kong; Lead Writer (Global) at the Hong Kong Economic Journal

EJI Weekly Newsletter

Please click here to unsubscribe