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Juan Liners: Demographic Sweet Spot and Other Drivers (or Show-stoppers) of Philippine Economy

The demographic sweet spot is said to be the time when our population has below 30% of aged less than or equal to 15 while those aged 65 or higher is less than 15%. Which means 55% of our population is aged 16 to 64 are economically productive and income-earning.

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Last week, an article entitled “Heading towards an economic miracle” written by Den Somera was published in Inquirer. I found the article a good and promising review of what the Philippines’ future looks like, in the coming years. Fingers crossed of course.
Among the key drivers cited for the continued economic growth towards a miracle are as follows:

Consumer Spending

In general, Juan has money to spend, thanks to remittances coming from our OFW heroes, so circulation of that money in our local economy continues. Plus the favorable exchange rate of our peso, which means higher purchase power for those who earn and receive foreign currencies.

Juan is Saving Himself

Aside from money to spend, savings rate has been improving as well, up to 33% of GDP in 2012 from 18% in the 90s. With more savings, hopefully Juan is becoming more and more financially literate, starting with his emergency funds, then protection, then eventually some more risk taking in terms of investments.

Fiscal Strength

More and more manufacturers (case in point automobiles) are once again considering the country as their manufacturing hub. Lower debt for the country as a whole, coming from more judicious borrowing and strength of internal economic activity, while on the opposite better international reserves.

Window Demographic Sweet Spot

This is the first time I’m hearing this but this sounds mysteriously inspiring. This is said to be the time when our population has below 30% of aged less than or equal to 15 while those aged 65 or higher is less than 15%. Which means 55% of our population is aged 16 to 64, considered to be the more economically productive and income-earning ages, which means more Juan who can earn his keep and take part in economic growth. This is expected in 2015, to last until 2050, and based from observations in other countries, there is indeed a positive correlation between this window and advanced economic growth.

Challenges

If there are key drivers, of course there will be challenges as well. The article cited the truck ban in Manila City which could be a cause of slower movement and transport of goods which means slower economic activity. Another  is the cost of power which is a by product of lack of supply (good time to invest in power companies?). Another is the over supply in high end real estate property (there are few high end customers actually) while there is still backlog in mass housing requirements, for those with lower socio-economic status.

Oh, and also our PSE remains overvalued in terms of P/E ratio compared to regional peers.

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The article did not include it, but I think other risks will be political risk, congestion risk and natural risk.

Political in a sense locally and internationally, we are viewed to still have high trust in our government leadership. But given the mind-boggling scams and the upcoming elections, will this trust and stability continue?

Congestion risk in terms of worsening traffic in Metro Manila, which also affects economic activity. Congestion in terms of the much-delayed government infrastructure projects (PPPs), which are meant to make lives easier in the long run, but for now will further aggravate traffic situations in affected areas. Congestion in terms of the limited capacity of NAIA, and how we lose money, time and tourism in the process.

Natural risk in terms of disasters: typhoons which are yearly and mega-earthquake, which is expected to hit Metro Manila anytime now. Is the country ready to mitigate the devastation brought by this, and if ever, how resilient will the economy and consumer confidence be if these disasters hit the center of Philippine economic activity: Metro Manila?

Oh, and the government’s stand on responsible mining and whether we should be more aggressive (yet responsible) in harnessing our natural resources. If we are too conservative in this regard, don’t we risk losing opportunity and failing to capitalize on this good economy (so far) and the demographic sweet spot? Add to this the recently conquered Benham Rise. How can the Philippines capitalize on this new piece of submarine land?

Here’s the link to the article: Heading toward an economic miracle. Fingers crossed every Juan.
Photo: IMG_3173 by Alchameo

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About Geri (356 Articles)
Founder and main author. Husband, used-to-be-breadwinner, God-made multi-millionaire, employee, financial planner and adviser, investor, stocks trader, entrepreneur, agri-preneur, book author. Firm believer that all Pinoys deserve a richer life. Not a guru, but a forever student of the investments world, a work-in-progress.

6 Comments on Juan Liners: Demographic Sweet Spot and Other Drivers (or Show-stoppers) of Philippine Economy

  1. Agree Tating. Still have high hopes for a better Philippines and may the next admin carry us to higher levels. Nonetheless we as citizens should also do our part. The govt is just one part of the puzzle in making PH better. Disciplined and educated citizens is another.

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  2. i also agree with Mr. Butch. however, how can we produce bright citizens when they lack proper nutrition growing up and lack the necessary things and means to come to- & excel at- school due to poverty. worse yet,those who are financially starved have the most number of children making the family more impoverished that sometimes going to school is not even an option. i have my fingers crossed that the next president will intensify the campaigns on proper family planning, poverty-eliminatiion, quality education, etc. with a no-nonsense iron fist.

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  3. I agree Butch. The demographic swet spot will be much sweeter if every Juan in the segment is well educated and skilled. Thank you for your comment.

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  4. The main challenge to the Philippines is to make sure that each of the young people who join the workforce should be beyond functionally literate and have marketable skills. But right now much of our young people are barely literate and do not have skills. This means perpetual poverty to most. The K-12 program is poised to help solve this problem. But we should realize ASAP that we need to spend on Public EDUCATION like crazy today. Let us do away with the various multi-Billion Pesos Dole Out programs the current government started. Identify depressed communities and focus on uplifting education there. Or else, the cycle of poverty that is so pervasive today would remain.

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  5. Thinking about it, we can actually include in political risk the risk of warfare against China and its claims. Or the political and financial struggles of other countries that could affect us.

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  6. Yes this is what people have been harping on, that the Philippines is in a demographic sweet spot.

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  1. Demographic Sweet Spot: Ito ang magandang panahon para mag-invest. | Archie Yuki

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