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Monday, March 3, 2014

The Pinoy Rate of Growth

The Indian economy has long been famous for the "Hindu Rate of Growth", which was characterized by a growth in GDP per capita of only one percent per annum - a rate of growth so slow that it was imperceptible to the general population.  This growth was attributed to the "Licence Raj", the Government of India's protectionist and interventionist policies.  The dismantling of the "Licence Raj" in 1991 with economic liberalization and reform has led to a considerable speeding up of per capita GDP growth.  Growth in GDP per capita (in constant 2005 US $) for India has now averaged 3.08% per year for the last 52 years (from 1960 t0 2012), more than double the 1.49% annual average growth rate for the Philippines during the same period.

Pinoy Rate of Growth

Do we have our very own Pinoy Rate of Growth, wherein economic improvement has been so slow as to be imperceptible? Around 10% of our population would shout a resounding "Yes!" and have voted with their feet, moving to other countries to find work and, perhaps, happiness.

Despite the acceleration of growth of the Philippine economy, growth in GDP per capita (in constant 2005 US $) has averaged only 2.90% per annum for the last five years (2008 to 2012), forty percent lower than India's 5.09% average annual growth rate for the same period. 

Although India is a large nation with a large economy, it has over a seventh of the world's population.  As a result, its GDP is spread out over a billion people.  This results in a per capita GDP that is much lower than the Philippines.  So even if India is growing much faster on a GDP per capita basis, it will take decades for India to catch up to the Philippines.

India's per capita GDP (in constant 2005 US $) now stands at $1,086 as of 2012.

The Philippines' per capita GDP (in constant 2005 US $) is $1,430 as of 2012, almost a third larger than India's.

Improved economic performance of the Philippines, in terms of GDP per capita, has been a relatively recent development.  Significant strides in the GDP per capita growth rate only came about with the last two Presidents.

As a result, many other nations have overtaken us in the past and many other nations probably will overtake us in the future.

President Diosdado Macapagal

President Macapagal's economic record, in terms of growth in GDP per capita (in constant 2005 US $), dwarfs that of the last four Philippine Presidents who succeeded him.  Despite this, six other nations that had a lower GDP per capita (in current US $) when he took office, eclipsed him within one year (1962).

  1. Algeria
  2. Brazil
  3. Dominican Republic
  4. Ecuador
  5. St. Kitts and Nevis
  6. Tunisia

A significant devaluation of the Philippine Peso versus the US Dollar, from Php 2.02/USD in 1962 to Php 3.73/USD  didn't help either.

When adjusted for inflation, no other nation overtook the Philippines in terms of GDP per capita (in constant 2005 US $) during his term.

President Ferdinand Marcos

Marcos loyalists like to point out that President Marcos economic performance was strong.  But the truth of the matter was that our nation's decline accelerated under his regime.

In terms of nominal GDP per capita (current US $), at least seven other nations, including our ASEAN neighbor Thailand, overtook us during his 21 years of power:
  1. Swaziland (1969)
  2. Morocco (1970)
  3. Paraguay (1970)
  4. South Korea (1970)
  5. Botswana (1972)
  6. Tonga (1975)
  7. Thailand (1983)

In constant 2005 US $, at least three other nations overtook the Philippines in GDP per capita: 

  1. Botswana (1975)
  2. Paraguay (1978)
  3. Thailand (1984)

President Corazon Aquino

Cory Aquino fared a little better than Marcos: no other nation surpassed the Philippines in terms of GDP per capita, both in current US $ or constant 2005 US $, during her term.

But Tita Cory ranks the lowest in terms of GDP per capita growth (in constant 2005 US $) among all the Philippine Presidents since 1961: a lowly 0.72% Compounded Annual Growth Rate (CAGR) during her term, lower even than her predecessor and nemesis, President Marcos (0.86% CAGR).

President Fidel Ramos

Despite undertaking a massive liberalization of the Philippine economy, particularly in the banking, power, and retail sectors, President Ramos' economic performance (1.28% in terms of constant 2005 GDP per capita CAGR) was better than that of Marcos (0.86% CAGR) and Cory (0.72% CAGR), but lower than that of  Macapagal (1.78% CAGR).

During his tenure, two other nations overtook the Philippines in terms of nominal GDP per capita:

  1. Samoa (1994)
  2. Egypt (1997)

In terms of constant 2005 US $ GDP per capita, it was even worse: four other nations overtook the Philippines, including Indonesia, another ASEAN country:

  1. Indonesia (1993)
  2. Cabo Verde (1994)
  3. Bosnia and Herzegovina (1996)
  4. Egypt (1998)

President Joseph Ejercito Estrada

Despite being ousted for corruption in 2001, President Estrada's economic tenure was at par with his predecessor Ramos, at least in terms of per capita GDP growth rates (1.28% CAGR), during his short tenure as our nation's President.

During his abbreviated term, one nation overtook the Philippines in terms of nominal GDP per capita: Equatorial Guinea (1999).

In terms of constant 2005 US $ GDP per capita, it was China (1999).

China is a special case, it has grown so fast in such a short time.  In 1961, its nominal GDP per capita was $76, while Philippines nominal GDP per capita, at $267, was 3.5 times larger.  For a long time, the thought that China could catch up with the Philippines was utterly inconceivable.  Today, China's nominal GDP per capita stands at $6,091 - 2.35 times the Philippines nominal GDP per capita of $2,587!

President Gloria Macagal Arroyo

At a per capita GDP CAGR of 3.07% (in constant 2005 US $), GMA's economic performance was more than 70% better than her dad's economic performance of 1.78% CAGR and more than double that of her dad's four successors.

Still, four other nations fared much better and overtook the Philippines in terms of nominal GDP per capita during her ten-year administration:

  1. Indonesia (2003)
  2. Republic of Congo (2003)
  3. Angola (2004)
  4. Sri Lanka (2005)

In terms of constant 2005 US $ GDP per capita, three other nations surpassed the Philippines:

  1. Armenia (2002)
  2. Bhutan (2002)
  3. Sri Lanka (2002)

President Benigno Aquino III

At a CAGR of 3.42%, Noynoy or PNoy's economic performance in terms of GDP per capita growth rates ranks the highest among all his six predecessor's, including that of his mother's.

 Mongolia, it turns out, grew much faster, overtaking the Philippines in 2010 in nominal terms and in 2011 in constant terms.

The Future:

President Benigno Aquino III: 2013 to 2016

Under PNoy, the country has been growing at a rapid clip and exhibited one of the best economic performances in the ASEAN region in 2013.

But other countries are growing much, much faster and are projected to surpass the Philippines by the end of his term in 2016.  In nominal terms, these countries are:

  1. Bolivia (2013)
  2. Papua New Guinea (2015)

In constant GDP per capita terms, no other countries are expected to surpass the Philippines.

President Jejomar Binay?

Who knows who will become President in 2016?  If history is any guide, Binay, as VP, will take over from Noynoy in 2016, just as Erap did from Ramos in 1998.

Nevertheless, our country is locked in a certain growth trajectory.  And if that growth trajectory holds, two other countries will overtake the Philippines in terms of nominal GDP per capita:

  1. Uzbekistan (2019)
  2. Vietnam (2022)
Yes, Vietnam, our bombed-out ASEAN rival, that only emerged from a debilitating war with the United States in 1975, could overtake the Philippines in nominal GDP per capita terms by 2022!

In constant 2005 US $ GDP per capita, no other country is expected to overtake the Philippines during Binay's (or whoever the next President is) term.

President Kris Aquino?

Projecting way, way into the future is definitely a crap shoot.  And who knows who will be President past Binay, if Binay ever gets elected.  Given our voter's penchant for name recognition, it wouldn't be surprising to see another familiar name as the top honcho of the country.  After all, we've already had two repeats in the last 52 years.  So Kris Aquino is my best bet.

But at our country's current economic path of growth, another bombed-out war-torn ASEAN neighbor will surpass us, at least in nominal terms, by 2024: LAO PDR

Which brings us back to India.  If current economic growth rates hold, even India will surpass us in terms of constant GDP per capita, by 2027.


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