Former socioeconomic planning secretary Cielito Habito warned that the Philippine economy is being weighed down by both internal weaknesses and external shocks stemming from US President Donald Trump’s trade policies.
Speaking at the Security Bank Economic Forum, Habito said that while inflation and unemployment remain relatively stable, deeper structural issues from job quality and governance to weak productivity and protectionist trade policies continue to hold the country back.
‘Our inflation rate is down to 1.7 percent, unemployment is at record lows of around 3.1 percent, but the quality of jobs and the mismatch in skills are our real challenges,’ Habito said.
‘The biggest chunk of our jobless now are college graduates, people who have studied all the way to find out they don’t fit in the workplace,’ he said.
The former National Economic and Development Authority chief noted that the Philippines grew by 5.4 percent in the first half, slower than last year’s 5.6 percent, with agriculture surprisingly becoming the fastest-growing sector at seven percent in the second quarter.
Government spending, particularly on consumption rather than infrastructure, has kept the economy afloat amid slowing private investments and exports. This is at a time when Association of Southeast Asian Nations (ASEAN) peers are grappling with similar global headwinds but showing stronger investment and export momentum.
‘The good news is we’re still the second fastest-growing economy in ASEAN. The bad news is that private investments and exports are slowing down,’ Habito said. ‘And we all know why – persistent hurdles in doing business, bureaucratic constraints, corruption scandals and weak governance.’
According to Habito, foreign direct investments in the Philippines remain among the lowest in the region, with the country being ‘second to the worst’ in ASEAN.
Goods exports, at around $70 billion annually, pale in comparison to Indonesia’s $201 billion, he said.
‘Our country is too inward-looking,’ Habito stressed. ‘We have been too defensive in our trade stance, trying to protect domestic producers but ending up uncompetitive and missing huge opportunities in global markets.’
Turning to global risks, Habito warned that Trump’s renewed tariff measures could once again disrupt global supply chains and hurt ASEAN economies.
‘Trump’s mode of economic policy is to raise import tariffs, reduce income taxes and rely on import duties to fund the government,’ he said. ‘That will lead to higher inflation in the US, wider inequality and a slowdown in global trade that will ripple across Asia.’
He said that while the Philippines may only have ‘moderate exposure’ to Trump’s trade wars, the resulting flood of cheap Chinese goods into Asia could threaten domestic manufacturers.
‘If Chinese goods can’t enter the US, they will flood Southeast Asia,’ he said. ‘That’s already happening. In Thailand, about a hundred factories have been closing every month over the past two years because of cheap Chinese imports.’