The Philippines was supposed to have made a significant breakthrough in economic growth and development during the administration of Benigno Aquino III (nicknamed PNoy) from 2010 to 2015. No more ‘sick man of Asia’– headlines declare. But from a long term perspective, is the PNoy period really a hallmark period when the Philippine economy would leapfrog into genuine economic development?
Let us give first a context before PNoy came into power. The GMA government had adequate growth especially compared to the previous Erap administration. But the author sees this mainly as a lucky result of the booming global economy from 2002 to 2007 partly due to low global interest rates, the booming BPO (business process outsourcing), a good global environment for exports, and most especially the steep increase in Overseas Filipino Workers’ (OFW’s) remittances during the GMA administration which stimulated domestic consumption.
Most of the GMA years, however, were rocked with corruption scandals and actual coups or mutinies that did not succeed. The instability brought about a growth that is bereft of any economic confidence and genuine economic transformation. Furthermore, the Arroyo government ended with the Great Global Recession of 2008-9 where the Philippines was hard hit, with investments and exports going down significantly in 2009.
This is in sharp contrast with most of Aquino’s years in office which was marked by high confidence from 2010 to 2014. The Aquino Administration enjoyed high popularity partly due to the popularity of ex-President Corazon Aquino, whose death spurred her son to run for President. It also projected a corruption-free Presidency despite perceived anomalies among some of his Cabinet members and local government allies. Most importantly the Philippines won several sovereign credit upgrades from Moody’s and Fitch that made the country’s debt investment grade. This was due to successful fiscal reforms which reduced the fiscal deficit substantially (especially with the successful enactment of the ‘sin’ taxes against cigarettes and alcohol products) as well as foreign investors’ perceived improvement in governance and sincere efforts to fight corruption. Business confidence boomed even as the global economy remained lackluster.
This paper proposes that apart from the continuing conducive circumstances allowing the GMA government to grow (continuing OFW remittances, a growing BPO sector and low global interest rates), business and investors’ confidence (both foreign and local), as well as government investments and expenditures, were primary factors of higher growth under the PNoy government.
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