What's up with the Philippine economy?

An economic slowdown and a dismal 6.8% inflation, 2018 has not been an impressive year for the Philippine economy. To add insult to injury, the stock market has deflated below 7000 points and the dollar is at its 9 year high. It seems like Philippines' economic honeymoon is over and it's turning sour. However, there's more to it when you dig a little deeper. Hang on guys, it's gonna be tough and it's far from over but there's light at the end of the tunnel.


The weak PESO- Due to weak OFW remittances, the government's build-build program and higher a trade deficit the peso has become  the weakest in ASEAN.  Let me first explain the trade deficit.

Figure 1

As you can see Philippines has a widening trade deficit, which means we are importing more stuff than what we're exporting. This causes Philippines to bleed dollars. Moreover the "build-build" program that costs P9 trillion is also adding to the weakening peso, since the government needs to borrow money to finance these mega structures it also has to pay in dollars. It's not all bad though, foreign companies are lured by the weak peso to invest more because of their money's higher value.

Unlimited Importation of rice- Currently rice has a farm gate price of  P16-P17 per kilo. It's a direct effect of the Executive Order, removing the limit on rice importation.


Inflation
Petrol Excise Tax- This is the magic phrase that caused everything increase,
 "TRAIN increases the excise of petroleum products, which has not been adjusted since 1997RAIN law merely updated a 20 year old tax system that Philippines has." -DOF
The former tax format was stagnant, TRAIN "merely" updated the tax collection in petroleum, causing prices to increase. For example. Gasoline excise tax in 1997 was 4.35 cents per litter, 21 years later, it's still the same. Here's what TRAIN's got to say.

Figure 2

VAT Exemption- There are 143 VAT exemptions, 80 VAT exemptions were removed. The good news is PWDs and senior citizens are still eligible for the exemption.

World market prices-  Philippines is not the only country being hit hard by the oil prices.

Figure 3

The Trump- He's also a huge reason why investors PH investors are in the red right now. You see, the US economy is doing really well. That's why foreign investors opt to leave Philippines which has a high inflation rate, weak peso and a looming government transition to federalism for US.




















Overall, yes. Philippines is in an "peculiar" situation but the good news is the economic fundamentals are still strong. Public spending, which is the number 1 economic driving force in the Philippines is at an all time high. So that means people have money to spend and are still confident. Furthermore the Philippines has a median age of 24.3, a very young population and a strong work force that will drive economy forward. Our economy might struggle but it will end and we'll be back on track to progress, hopefully sooner rather than late. Thanks for reading.