Looking back, looking ahead
The Romans named the first month of the year after Janus, the mythological god of doors and gates, who had the distinct ability to see both the past and the future. He was thus depicted to have two faces, one facing backward and the other forward. January is the time to review the year just past, and examine and anticipate what lies ahead. Here I focus on the economy, my area of expertise, and will mostly highlight my usual PiTiK indicators of presyo (prices), trabaho (jobs), and kita (income).
News had been generally good on prices last year, as the annual inflation rate slowed down to an average of 3.2 percent from January to November. This nearly cut in half the 6.0 percent full-year average inflation rate in 2023, which had begun with a record 8.7 percent inflation, but was tamed to 2.8 percent a year later. While price increases sped up again until July last year, it tapered off in succeeding months and slowed to 1.9 percent in September. It slightly sped up again in the next two months (the Philippine Statistics Authority is releasing the December figure and full year numbers today).
Food prices have been the main driver of our inflation, and the tempering we have seen in the past year was the effect of the eased importation of critical food commodities that have been in short supply in the past two years. All this is a reflection of the weak performance of the agriculture sector, which has been reeling from natural calamities perennially affecting crop and livestock production, and from persistent governance and institutional weaknesses hampering improvement in productivity.
On the jobs front, the numbers also look generally good with the overall unemployment rate at historically low levels, having fallen below 4 percent five times between February to October—something never seen since the 1980s. The underemployment rate, averaging around 12 percent in the past year, is also historically low, having hovered consistently in the upper teens in previous years. But there is an underlying problem in that nearly one of every two jobless workers in our economy has a college education, with one out of three being a college graduate. This suggests that the level of jobs being generated by our economy still leaves much to be desired, and the mismatch between jobs and skills among college graduates remains a major challenge.
The indicator for income is the gross domestic product (GDP), with all its inadequacies in reflecting the true welfare of our people as producers, workers, and consumers. Looking at the first three quarters (i.e., first nine months) of the year for which we have the actual data, the overall income growth this past year (5.8 percent) was a slight improvement over the same period in 2023 (5.6 percent).
But the aggregate figure conceals much of what lies beneath. That aggregate growth was the combined effect of a 1.5-percent decline in agricultural production and incomes, and 6.1 and 6.7 percent aggregate increases in the industry and services sectors, respectively. Thus, it was a growth that left farmers and farm workers worse off, with production of almost every crop having declined. The only farm products that saw an increase over the first nine months were coffee, cacao, tobacco, and poultry and eggs. Rice (palay) has seen a hefty decline of -7.3 percent, along with corn (-3.4 percent), coconut (-2.5 percent), sugar cane (-2.6 percent), banana (-2.9 percent), and livestock (-3.3 percent). The last tells us that African swine fever continues to wreak havoc on our swine industry.
All told, Philippine agriculture is in crisis, and the solutions continue to be elusive despite massive budgets having been allotted to the sector in recent years. It is time to have an earnest multisectoral effort to examine what keeps ailing this vital backbone sector of our economy. Institutional reforms have long been elusive, and palliative solutions that have never really improved the sector continue to be the favored approach.
Looking forward, what are the PiTiK prospects in 2025? The recent uptrend in inflation is mostly a reflection of continued failures in agriculture, and food price prospects hinge on our success at raising the productivity and competitiveness of our farms and farmers. But external inflation drivers largely beyond our control like oil prices, world commodity price movements, and the exchange rate will also shape our domestic price movements. Job quality will remain a challenge this year, and will depend on our ability to attract more investments in manufacturing and high value services, where college graduates could be gainfully employed. Overall GDP growth will probably stay the same, but where that growth comes from is what’s important. Hopefully it will not mainly be driven by election spending this year.
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