Optimism is vitally linked to positive movements in the market which is what the economy needs. But the private sector is only half the story; government has to powerfully write the other half by ensuring optimal conditions are in place for the market and its stakeholders to flourish.
Nearly 1,000 business, government and academic leaders in member countries of the World Economic Forum were recently polled with the results showing that only one in 10 of these members sees global recovery to pick up speed in the next three years. Only one in six was optimistic about the world outlook. Not encouraging at all.
Yet survey upon survey even in the heat of the pandemic and in the wake of other natural disasters, optimism among Filipinos does not abate as they see the light at the end of the tunnel even as predictions highlight indicators saying that the light seems to have dimmed.
Fortunately for the country, optimism can boost the economy through what is called the Happiness Effect, making people spend, pushing demand and creating jobs.
So despite the challenges of the last two pandemic years and the uncertainties of the coming months given the omicron, Filipinos are training their eyes on a promising future that will keep its promises no matter the odds.
Despite the omicron–with ramped up vaccination and gradual reopening of the economy boosted by strong consumer spending– there is optimism even, and especially, among leaders of conglomerates, a sentiment shared with the ordinary Filipino.
While some hard-hit business sectors are expected to take years to recover (some, maybe never), others have hit the ground running with pivots to other methods and adaptions of new tools to better reach consumers and continue to provide them their needs. It will be a difficult climb out from the hole for many but private and public collaboration will be the boost and the ladder the economy will need.
“Narrowed margins brought about by cost inflation and muted demand in services” are the hardest to deal with for many businesses. But business leaders have plans.
“Our plan is to manage (the) headwinds through better pricing and cost management measures,” said JG Summit’s Lance Gokongwei, president and CEO of the airline, hotels, malls and food conglomerate.
Ayala president and CEO Fernando Zobel de Ayala for his part said that his group’s initiatives at adapting and readjusting itself in the new business environment has helped them weather the challenges of the pandemic, adding that with vaccination being ramped up and the economy gradually opening things are looking up.
For the MVP Group, continuity of service amid mobility restrictions was a challenge but keeping faithful to their commitment to the community, they had to reassess their priorities “and draw the line between what’s essential and what’s not.”
“As we look forward to 2022, we draw our attention to other essential priorities, foremost of which are innovation and digital transformation…We intend to further explore opportunities in the digital space especially those that will make our operations and facilities even more efficient,” MVP said in a report.
Small businesses have different challenges that are not necessarily small, just different.
With profit margins drastically cut– even non-existent for many– experts advise improving operations and adapting business models. But finding the cash to do this is of course the challenge many of them might never find the answer to.
This is where financial institutions, those in government and the private sector, can step in to ease pain. Collaboration has to happen.
Given that the exponential growth in e-commerce, which accelerated by five years (WE Forum), has allowed small businesses to compete with traditional ones or those with no online exposure, these small enterprises, even those ran by single-person online sellers, can compete in the global market. E-commerce has enabled small business to compete without having to turn to expensive tools (one’s internet connection does not cost millions). Trade barriers have been narrowed, borders have been breached; the promise is too huge to ignore.
As previously reported in this paper, “Business-to-consumer (B2C) electronic commerce (e-commerce) export revenue from Philippine sellers could reach $555 million or P26.9 billion in 2026, about three times more than the $179 million EP8.7 billion they earned last year, according to a study cited by Amazon.” Significantly, “a research study done by AlphaBeta in 2021 indicated that of the P8.7 billion earned by Philippine sellers last year, 25 percent is from MSMEs.
At a World Economic Forum, it was discussed how “Today, small businesses — even one-person “social sellers” — can run as global entities thanks to the growing availability of inexpensive digital tools that allow them to source, ship, deliver, pay, collect and virtualize other key aspects of their operations. The fast-developing e-commerce ecosystem, which includes marketplaces, payment gateways and online logistics, is helping to reduce barriers to trade across borders.” E-commerce has erased the barriers to become the equalizer in trade and commerce.
Export participation rates for traditional small businesses (those that typically do not sell online) range between 2-28% in most countries. In contrast, 97% of internet-enabled small businesses export, according to the World Trade Organization. COVID-19-induced lockdowns have hastened the growth of small business.
WE Forum also said that “Asian countries are expected to exhibit the biggest growth of the consumer class among the world’s 30 biggest consumer markets…Currently, 55% of the global consumer class live in Asia…Nearly 76 million Indonesians will make (that country) the fourth biggest consumer market in the world, behind China, India and the U.S….Bangladesh, Pakistan and the Philippines also expect big growth.” We will ride the wave.
And while omicron, the latest covid variant, has stalled what was generally seen as an impending recovery of the global economy (or, in the Philippines, at least a return to pre-pandemic economic growth rates), the world is in a far better place than two years ago when lockdowns all but drove economies and the world’s optimism to the ground. That was a time when nobody knew much about anything–about the virus and its impact on lives and living. We still don’t know everything, but we certainly know better now.
In all scenarios, it helps that the Philippines sits on the 25th place of the biggest consumer markets in the world in the World Bank’s list of 174 markets/economies (HFCE is 73% of GDP). Better yet, it is projected to be kicked up to 13th place in the list by 2030 (WE Forum) with nearly 38 million people joining the consumer class, or those who spend roughly $11 average a day. This will be an important piece of information for investors and policymakers whose job it is to keep their eyes open for such signs.
As always, consumer spending will give the economy the tonic it needs. And stronger consumer spending will give it a stronger kick. People are reading the signs.
Online stockbroker Colfinancial.com is advising investors to look into consumer stocks that will benefit from reopening of the economy, and higher election spending. A good sign of the rosy outlook in consumer spending.
“Despite higher COVID-19 cases, we do not expect 2022 to be plagued by the same levels of lockdowns we faced in 2021. The increased mobility, coupled with the 2022 consumption historically increased during election years. Over the past three election years, household consumption grew by an average of 3.8 percent in real terms. This is much faster compared to the 2.6 percent growth recorded during non- election ypresidential election should help spur consumption this year. Note that household ears,” it said.
From Governor Benjamin Diokno of the Bangko Sentral: “Favorable market outlook, rising vaccination coverage in the country, and the BSP credit-related relief measures are expected to further boost market confidence and encourage bank lending.”
For the year 2022, Diokno said the BSP will continue its reform agenda to ensure “a safe, sound, and resilient financial system that supports the country’s recovery as well as its balanced, inclusive, and sustainable economic growth.”
The picture therefore is far from grim that some would fear even a cursory glance at it. BSP has assured a sound and resilient financial system, investors will take notice, health is still a huge issue (as in all other parts of the world) but it is getting government’s full attention.
The leaders of the country’s biggest conglomerates are optimistic, and these are the people who have grown their businesses from knowing what clicks with Filipinos, and therefore the market. If their optimism is to be a gauge of how well the Filipino sees the brighter side of the picture and how positively they will act on it, then we are in for the upside. It might not be in the immediate future for some, but for the longer term, we all will be.
Optimism is vitally linked to positive movements in the market which is what the economy needs. But the private sector is only half the story; government has to powerfully write the other half by ensuring optimal conditions are in place for the market and its stakeholders to flourish. If prayers are answered for unprecedented spending on health care and infrastructure, for urgent economic laws to be passed, for innovation to grow some more and never let up, for sustained demand for goods and services to create more jobs, for small business to reap the benefits of public-private collaboration, for resilience to be the nation’s call to arms in the face of treats to health and livelihood, then optimism will have paid, and paid well. – DL Mayo.
