IMF retains Philippines growth outlook for 2024, 2025

The International Monetary Fund (IMF) has retained its growth prospects for the Philippines for this year and next amid challenging private consumption expansion in the country.

Based on the World Economic Outlook (WEO) released yesterday, the Washington-based multilateral lender kept its gross domestic product (GDP) assumption for the Philippines at 5.8 percent.

This was the same forecast the IMF gave the Philippines during the 2024 IMF Article IV consultation earlier this month.

While this is an improvement from last year’s 5.5 percent expansion, it falls below the six to seven percent growth assumption set by the Cabinet-level Development Budget Coordination Committee (DBCC).

The IMF said private consumption is going to grow slightly with less momentum. The sector’s growth during the first semester was lower than expected due to more expensive food prices.

Private consumption rose by 4.6 percent in the second quarter, slower than the 5.5 percent growth in the same period last year.

IMF’s growth forecast for the Philippines remains one of the highest in the region, next to Vietnam’s 6.1 percent.

This year, the Philippines is expected to grow faster than Indonesia, Thailand, Malaysia and even China.

Likewise, the IMF retained its 6.1-percent GDP assumption for 2025, also way below the 6.5 to 7.5-percent target of the economic team.

For inflation, the IMF also did not change its inflation forecast for the Philippines, which would ease to 3.3 percent this year and further to three percent in 2025.

The latest data showed that the September inflation eased to an over four-year low of 1.9 percent, even falling below the expectation of the Bangko Sentral ng Pilipinas.

The sharp reduction was primarily due to slower increases in the prices of food and non-alcoholic beverages, as well as transport and housing water, electricity, gas and other fuels.

In its report, the IMF noted that the global battle against inflation has essentially been won, even though price pressures persist in some countries.

However, the IMF also warned that downside risks to inflation are rising, specifically with the escalation in regional conflicts, monetary policy remaining tight for too long, growth slowdown in China and continued protectionist policies of some countries.

World Economic Outlook 2024.pdf

Download PDF • 9.66MB

Source: Philstar

Shrinking Family Sizes May Change Our Experience with Aging

Throughout the world, the number of relatives that people have may dramatically shrink by 2095, which could change care for children and aging people

For many families, extended relatives are a core part of caregiving. Grandparents, aunts and uncles can help parents look after young children. In turn, siblings and cousins may help care for aging parents. But the availability of such support—which many cultures have depended on for millennia—is quickly dwindling: a new study predicts extended families around the world will keep getting smaller as people live longer and have fewer children.

Using international demographic data, researchers recently projected the structure of families in every country around the world. They estimated that, globally, a woman who is 65 years old in 2095 will have only 25 living relatives. That represents a nearly two-fifths reduction from an estimated total of 41 relatives in 1950—and a nearly 42 percent reduction from an estimated total of about 43 relatives in 2023, according to the researchers. These estimates suggest that more people, especially in lower-income countries, will face a steadily increasing burden of caring for older people and children as intergenerational support disappears. The findings, which also note a pressing need for more formal care systems or institutions, were published in December in the Proceedings of the National Academy of Sciences USA.

Credit: Amanda Montañez; Source: “Projections of Human Kinship for All Countries,” by Diego Alburez-Gutierrez et al., in Proceedings of the National Academy of Sciences USA, Vol. 120, No. 52; December 19, 2023

Understanding changing family structures is an urgent matter in many countries that lack effective social security or other institutional support systems, says Sha Jiang, a demographer at the University of California, Berkeley, who was not involved in the study. Instead societies often have to rely on families to support the most vulnerable people in their population, such as older people. “So this raises an important issue,” Jiang says. “Will there be enough family members to take care of those [older people]? Or do we put too much burden at the family level?”

Researchers can analyze long-term data trends to answer these questions. Demographers look particularly at a phenomenon called the demographic transition: a shift away from high birth and death rates. Many analyses show this is currently causing the world’s population to skew older. But how this change specifically affects extended families and their composition has received less attention, says the new study’s lead author Diego Alburez-Gutierrez, a social scientist at the Max Planck Institute for Demographic Research in Rostock, Germany.

In their analysis, Alburez-Gutierrez and his colleagues made three major predictions about family structures, also called kinship networks. First, extended family size will likely decrease over time. Second, the composition of families will narrow: Alburez-Gutierrez explains that people will have fewer close-aged relatives in their own generation, such as siblings and cousins, and more ancestors, such as grandparents and great-grandparents. Third, age gaps between generations will grow as people increasingly have children later in life.

Credit: Amanda Montañez; Source: “Projections of Human Kinship for All Countries,” by Diego Alburez-Gutierrez et al., in Proceedings of the National Academy of Sciences USA, Vol. 120, No. 52; December 19, 2023

Forecasting patterns like this on a global scale “wouldn’t have been possible five years ago,” says Ashton Verdery, a Pennsylvania State University sociologist and demographer, who was not involved in the study. Many past demographic studies have focused on the nuclear family (defined as two parents and their children) because most readily available data measure changes within individual households. Methods that quantify changes in the number of cousins, aunts, uncles, niblings (a term for nieces and nephews) and other extended family greatly advanced in the past decade. “It’s a fantastic application of newly developed methods,” Verdery says.

The study foreshadows potentially drastic problems for health care. The findings suggest extended families may shrink very quickly in countries that are just beginning to see lower birth and death rates, such as those in Latin America and sub-Saharan Africa. Most of these countries currently don’t have systems in place to care for a growing aging population and will likely struggle with the rapid change, Alburez-Gutierrez says. Much more of the medical, financial and emotional burden may fall on a single person instead of being spread out over multiple family members. This would put additional stress on those who are lower-income and stretched for time.

Some countries that already have low birth and death rates are facing these issues today. In China familial-based care is still considered the norm, Verdery says. But as the country undergoes mass aging, and the availability of caregivers dwindles there, people are often “sandwiched” between taking care of their kids, as well as their own parents and grandparents. Some face increasing financial stress as they pay for older adults’ care, in addition to supporting their own children. Others, notably many women, often drop out of the labor force to invest more time in caring for their family, Verdery says. Smaller extended families also mean some members may become increasingly isolated socially and could struggle with loneliness.

Alburez-Gutierrez notes that this new analysis does not include adoptive families and LGBTQ+ families. “People can make a family in many other ways,” he says. But current data and modeling tools are limited in their ability to quantify these family networks, as well as other sources of support, such as friends or other community members.

Strategies that address an aging population also may be useful when it comes to supporting smaller families, Alburez-Gutierrez adds. These might include extending health care coverage for aging adults, restructuring pension systems and investing in affordable child care infrastructure. Initiatives in some countries are also building more multigenerational housing to make it easier for older adults to live with their children, Verdery says. Other countries have found creative ways of using existing community structures to foster social connectedness. France, for example, launched a program a few years ago where postal workers can make check-ins on older residents as they deliver mail along their routes. Community support organizations can also help adults navigate difficult logistical, financial and emotional challenges of long-term care.

Families are very relevant when it comes to understanding population health, especially outside the Global North, Alburez-Gutierrez says. Societies have been built around the expectation that supportive family networks will always exist, he says, “but that is going to change in the near future.”

Source: Scientific American

Development in the 21st century: Waiting for Godot

The Irish writer Samuel Beckett received the Nobel Prize in Literature in 1969. Waiting for Godot is his famous 1953 surrealistic tragicomedy, where the two main characters, Vladimir and Estragon, are engaged in a variety of discussions, while they wait for someone named Godot. They are not certain if they have ever met Godot, nor if he will even arrive.

A quarter of the 21st century is gone. Today, countries like India, Indonesia, Saudi Arabia, or the Philippines, feel an immense pressure to move up in the income ladder. This has prompted them to create development plans that assume they will grow by about 7% per year, like the East Asian Tigers did several decades ago. Will this become a reality, or will it be like Waiting for Godot?

The problem is that the East Asian super-fast growth miracle has not been the historical development norm. It took today’s advanced countries about 100 years on average (almost 150 in the case of the Netherlands) to traverse the middle-income segment, that is, from the time they graduated from being low-income to the moment they became high-income economies (https://jesusfelipe.net/wp-content/uploads/2022/07/Middle-Income-Trap.pdf).

The reality of development is that it has been a very slow journey, at low growth rates. Very fast growth and sustained growth is a recent phenomenon that has occurred only in the second half of the 20th century in a few countries. This means that countries like the Philippines, with an income per capita of just above $4,000 today, must have grown very slowly for a very long time.

We looked at a much richer nation today, the Netherlands, and obtained its long-run annual income per capita growth profile: 0.09% between year 1AD and 1826, 1% between 1827 and 1955, 3.3% between 1956 and 1970, and about 1.6% afterward. The figures we obtained for the last 224 years give an average annual growth rate of 1.19%. My guess is that Filipino and Dutch per capita income growth rates were not significantly different until the last decades. This means that the Philippines’ starting point must have been much lower.

We have an estimated (an admittedly rough guess) Philippine income per capita in 1800, 224 years ago. We know that income per capita today is $4,200. Applying the Dutch income per capita growth rate of 1.19% implies that Philippine income per capita in 1800 was about $300. In the case of the Netherlands, its income per capita in 1800 must have been about $4,550 (slightly above Philippine income per capita today!), which, at an annual growth rate of 1.19% over the next 224 years became the current $65,000. This implies that the large gap between today’s advanced nations and the rest of the world was established long ago. It has been impossible to close it.

Recent estimates from Oxford economist Lant Pritchett (“Keeping the Gold in the Golden Rule: Economic growth and the basics of human material wellbeing,”) indicate that today, there are 29 countries with a per capita income below that of the world leaders in 1700; 19 countries with a per capita income below that of the world leaders in 1870; 17 countries with a per capita income below that of the world leaders in 1918 (the Philippines is in this group); 24 countries with a per capita income below that of the world leaders in 1950; and 23 countries with a per capita income below that of the world leaders in 1968.

The East Asian economies understood that the fast track upwards was the result of getting into manufacturing and exporting. They understood that not all products have the same consequences for development. Entering manufacturing and leaving behind basic products (compare the export basket of South Korea in 1970 with today’s) meant understanding how income is generated in a modern economy. Exports forced competition in world markets, not just at home. This also implied improving what was produced (higher quality) to be able to continue competing.

While the leaders of the East Asian economies recognized the power of this recipe very well decades ago, many of their peers in today’s developing countries have not grasped it yet. Vietnam may be an exception. Reading the programs of many developing countries leaves you bewildered. These programs are a salad of dozens, even hundreds, of objectives, without a clear prioritization (there are over 350 in the latest Philippine Development Plan 2023-2028;).

Although there has been progress during the last decades, this has occurred at a slow pace for most countries, and overall, the world has not experienced income convergence. Why?

For one, although developing economies have grown faster than advanced ones, the former fall by more than advanced countries when they fall prey to a crisis. Second, the “base effect” is a great burden. Imagine an advanced country with a per capita income of $50,000. This country’s income per capita grows by just 1%. The following year, its per capita income will be 50,500 dollars. Now let’s think of a country with an income per capita of $4,000 that grows by an amazing 10%. This country will reach $4,400 the following year. Despite growing 10 times faster than the advanced country, the absolute gap between the two has increased by $100. This is what happens in reality, namely the growth of developing countries, despite being higher than that of advanced countries, is not enough to close the gap due to the low starting point.

Overly ambitious development plans will not be fulfilled because most developing countries tend to see “boom and bust” growth, that is, periods of growth acceleration followed by periods of growth deceleration. Circumstances or policies that produce 10 years of rapid economic growth appear easily reversed, often leaving countries no better off than they were prior to the expansion.

Excelling in manufacturing is not easy, but it is the only way up. There are niches that can be exploited in virtually all manufacturing segments: glasses (chemicals), cutlery (metals), tables and chairs (furniture), table napkins, bedsheets (textile), shoes, or furniture; and in the sophisticated machines that make these products. It is in the latter where the value-added hides and what makes rich countries rich.

The products we mention are the ones that “make a nation” and which most developing countries should be able to manufacture for home consumption and to compete in export markets. No developing country should say “we do not have comparative advantage in the manufacture of glasses or chairs” and then think of automobiles and other complex products. We cannot help but paraphrase Donald Trump’s famous statement about steel: “If you don’t have steel, you don’t have a country.” This is even more obvious in the case of the products we mentioned.

What developing countries need is modern capitalist firms with the necessary capabilities to make such products — these firms are the missing link. These capabilities are tacit knowledge to organize work and operate machines efficiently, both required to make high-quality products. Enhancing these capabilities should be the focus of economic policy.

Given the weight of history, the governments of developing countries are not to be blamed for the fact that their countries are “poor” today. Yet, they are to be blamed for implementing wrong economic paths and for promising the arrival of Godot. In Beckett’s play, a boy shows up in the middle of it and explains to Vladimir and Estragon that he is a messenger from Godot, and that Godot will not be arriving tonight, but surely tomorrow. Yet, Godot had not arrived by the end of the play.

Unless policy makers understand the reality, their (developing) economies will not be able to close the breach with respect to the advanced nations (which are marching forward too) during the rest of this century.

By the year 2050, the Philippines will be a richer economy than it is today, closer to the World Bank’s high-income threshold; but it will not be a rich, high-income, country as we understand the term, that is, as what the European countries, Japan, the US, Canada, or Australia, “look like.” True convergence with them may happen toward the year 2100 or in the 22nd century, barring economic or health crises, and wars, and only if we make significant efforts toward having an economy that resembles theirs.

This applies to many other Asian countries. While it is true that Asia’s weight in the global economy will increase further, most countries (think of Afghanistan, Nepal, Cambodia, Myanmar, and even of Bangladesh, Pakistan, or Sri Lanka) will remain far behind the advanced nations in per capita income because companies in the former make poor-quality and simple products that fetch low prices in international markets.

They will still have cities with poor infrastructure, transportation, and waste management, and they will not have universities among the top 25 in the world. To say otherwise is to lie.

Author: Jesus Felipe is a distinguished professor of Economics and a research fellow at De La Salle University. Beatriz Elaine Banzon is an Economics student at De La Salle University.

Economic growth and the basics of human material wellbeing.

Download • 1.01MB