Socio-economic Planning Secretary Ernesto Pernia: Connecting regions to the economic mainstream
These were the two words that best described Socio-economic Planning Secretary Ernesto M. Pernia, PhD, as he spoke with the Philippines Graphic last week.
His optimism and confidence was justified because, as he noted during his yearend press briefing last December, the Philippines remained among the fastest growing economies in Asia.
“We are currently the second fastest after Vietnam (for the third quarter of 2017)—ahead of China, India, Malaysia, Indonesia and Thailand,” he said.
It’s an apt statement, especially since NEDA is celebrating its 45th anniversary this January. As NEDA marks that milestone, Sec. Pernia shared his view about NEDA’s past and its future.
“In general, I think we are better off than the earlier years,” he told the Graphic. “The economy is growing very consistently. And the trajectory, I think is quite promising, in terms of economic growth.”
Graphic: What are NEDA’s core economic projections for 2018?
Pernia: Well, we are projecting an economic growth rate between seven and eight percent. And then inflation on the order of between two and four percent. Maybe with a spike at the most of one percentage point in the first few months because of the introduction of the TRAIN.
But for the whole year, we’re still expecting an inflation rate of between two to four percent.
Last year, it was 3.2 percent. That was the average for 2017.
In 2014, it hit more than four percent.
So, the projection for the inflation rate can actually be described as better than 2014.
Yes. If you look at the historical record, we had an inflation rate close to double digits.
Under the context of the new signing into law of TRAIN, how would this impact the government’s Build Build Build policy?
Well, those have been taken into consideration already in terms of the Build Build Build program.
So, it’s been factored in.
Yes. A percentage point of inflation just like last year is not going to be much relative to the billions of pesos that will be spent for major infrastructure projects.
There has been a subtle rise in prices of goods due to the taxes imposed by TRAIN. How should this be explained to the layman?
You know, these are knee-jerk reactions and normally, when there’s an opportunity for retailers or sellers to raise prices, they will take advantage of that. So, it’s really some kind of anticipating what is going to be the real inflation rate. Which is not good because it will have an effect. It will become a self-fulfilling prophecy. This matter is really more under the purview of the Department of Trade and Industry. They monitor prices.
NEDA is more involved with projections and helping formulate policy.
Developments overseas always have a potential economic impact, either adverse or beneficial, to the Philippines. What do you see as potential challenges the Philippines has to face this year?
Well, this is considered in our projections. We refer to them as risks and uncertainties brought about by global developments. Possibly, it could be the increase in interest rates because of the tightening of monetary policy in the United States and the other advanced industrialized countries. There is that possibility that higher interest rates might have an impact on the Philippines and other emerging economies.
How about the BREXIT issue between the United Kingdom and the EU?
Yeah, that could also be one. Usually, the U.S. is the leader in terms of monetary and fiscal policy changes and the other developed countries like those in Europe would follow suit because of the globalized system of trade.
There have been some analysts that claim BREXIT might cause a downturn in the UK economy and that, in turn, might have an impact on the remittances sent home to the Philippines by Filipinos working there.
Well, to the extent that BREXIT is going to have a negative or adverse effect on the U.K. economy, then that might have an effect on our overseas Filipino workers in the U.K. Reciprocally, there’s going to be an effect on the other EU countries because of the exit of the UK from the EU. There will be some effect. But that’s still to be determined because we don’t know what the effect will be.
Yes, sir. Primarily because the exit negotiations between the EU and the UK are still ongoing. Things are still fluid.
In that case, we can only adopt the attitude of hope for the best but prepare for the worse?
That’s correct. There’s also geopolitical tensions in the Middle East that can also have an effect on our overseas Filipino workers and by extension, the remittances they send to the Philippines.
What do you see as emerging economic developments abroad that could benefit the Philippines?
Well, the economic performance in the EU and also in the U.S. has been better than anticipated. In fact, that has a broad effect on our exports.
And that means more dollars for the country and that will have an effect on the value of the peso?
I don’t think this would have a significant effect. But that is under the watch of the BSP.
The thrust of the Duterte administration is to increase investment spending. Given that there are only limited slices to the budgetary pie, what do you believe should be prioritized by the administration this year, especially in the context of NEDA’s analysis of developing issues?
Well, the stress is to interconnect the regions, especially the outlying regions of the country so that they will become part of the economic mainstream. We need to get them to participate more closely in economic activity so they can receive the benefits of economic growth.
There is always something new that develops. With NEDA’s role as adviser to the policy maker, are there adjustments that must be done in order to adjust to these developments?
Well, yeah. Our infrastructure projects are prioritized from the most important to the most impactful in terms of development, inclusive growth and poverty reduction. So that’s what we’re doing. We’re doing things that we think do matter for economic development. We also prioritize investments in social services, education and health.
I asked that question because one unforeseen development last year was the flare up in Marawi City and that’s going to eat up a chunk of the budgetary pie.
Well, the activity in Marawi will be mainly infrastructure restoration and infrastructure development. Well, of course, it would have been better if the Marawi event did not happen but since it’s there, we have to find ways of financing whatever is required to restore Marawi to its original state.
Maybe we need to float bonds. We have these Panda bonds to be floated in China and the Samurai bonds to be floated in Japan, mainly to finance the rehabilitation of Marawi.
How much would be floated?
The amount is still to be determined.
When will these bonds be floated?
It should be done by the first quarter of this year.
One of NEDA’s core functions is to provide policy alternatives, especially during short term policy reviews. But the reality is that sometimes there are personalities involved.
Well, that’s part of the political economy of project implementation or policy implementation. That’s a reality and we have to be able to handle situations like those. Given that we have a President with political will, he can handle those critical interventions from either the Senate or the House of Representatives.
There has been a perception that whenever there’s a change in administration, long term plans tend to go down the drain. That’s why only short-term plans tend to be implemented.
No. We are trying to set the tone for this development plan and subsequent development plans. It’s a long term vision to achieve a country that is virtually free of poverty, competitive and resilient.
Given that NEDA is looking at its 45th year, how do you see this institution today?
In general, I think we are better off than the earlier years. The economy is growing very consistently. And the trajectory, I think is quite promising, in terms of economic growth.
What do you see as NEDA’s challenge in the near future?
As I’ve said, the challenge is to see to it that we set a good example in terms of political administration, economic policy and infrastructure development in which subsequent administrations will be motivated to continue. I think they’ll be compared to the good job of this administration so it will be a strong motivation for them to continue what has been built under this administration.
To wrap this up, is there anything you want to say to the layman about economic conditions today in the context of developing events?
Well, it’s important that there’s unity among Filipinos in terms of achieving a vision of a Philippines that is virtually free of poverty, a country with a strong economy, a citizenry that is trusting of themselves, their countrymen and their government. This will allow us to achieve higher goals in the years to come. G