Question: Our economic fundamentals showed a lot of improvements lately—credit ratings upgrades, BSP rate cuts, lower inflation rates and stock market all-time highs. But it seems Juan dela Cruz doesn’t feel these improvements yet. The poverty and unemployment rates are still high according to news. How long will it take for our poor kababayan to feel the said improvements in our economy?
—Leo Manalaysay via Facebook
Answer: With all that we see and hear about the growth of the Philippine economy, there is real reason to be very optimistic about the future. I share the view of many that the Philippines will be among the most prosperous nations in the near future, all in God’s time.
Economic growth ushers many positive changes and if the government and the business sector will properly manage growth, the benefits will ultimately trickle down to the masses. Economic growth can manifest in different ways but not all of them will have the desired effect. Some growth can be unsustainable and without sound fundamentals. Managing the economy through growth can just be as tricky as managing it through recession. A properly managed growth should be able to create a healthier business environment that will generate more employment and more taxes, and should be sustainable. As more jobs are generated, our kababayans will be able to experience better income opportunities, lower unemployment and underemployment. It is through better employment that economic growth can really trickle down to the masses.
The big issue is when. Typically, it takes time before all the benefits of economic growth can be felt, and business and the government will be the main drivers. Unlike in the stock market, where a report on economic growth can cause an overnight spike in the bourse, it takes time before business can actually experience the gains.
A corporation will want to perform adequate study before going into an expansionary phase, ascertain first if current capacity can accommodate the growth in demand for its products or services.
Companies will not immediately go into hiring more employees because it will need to ensure that the new hires will actually contribute to a better bottom line and not the other way around. Businesses need time to expand as they would still have to raise more capital, study trends and build capacity.
There must be some effects in a year or two, but not in a quarter or two. Will the effects be felt by the masses? Only if growth will result in increased employment.
Another concern is, how ready are we for the change? While many of us will benefit from the growth, how we benefit will differ from one individual to another. Some individuals will use this as an opportunity to save and invest more money that will open more opportunities for wealth accumulation and long-term savings. However, some may opt to use the income improvement for short-term wants and a lifestyle upgrade– when we do so, we will miss the opportunity to have a better quality of life that is sustainable.
While waiting for positive changes to trickle down to us, it is best that we remain prudent with whatever we have. If we can manage the little we have now, we will also be able to manage our resources when they get bigger.
“If you are faithful in little things, you will be faithful in large ones. But if you are dishonest in little things, you won’t be honest with greater responsibilities.” —Luke 16:10, NLT
Learn comprehensive investment ideas, attend “Wealth Strategies for Everyone” on Nov. 23, 2012 at RCBC Plaza.
Randell Tiongson is a director of Registered Financial Planner Institute (Phils). A free personal finance talk will be held on Nov. 28, 7 p.m. at PSE Center Ortigas. For details, e-mail at email@example.com or visit www.rfp.ph.