By Beting Laygo Dolor, Contributing Editor
The Philippines is set to fall behind Vietnam in terms of Gross Domestic Product (GDP) growth this year, according to the International Monetary Fund (IMF).
IMF projections released last week state that Vietnam’s GDP will hit US$3,497.51 this year, overtaking the Philippines’ US$3,372.53, based on current prices.
GDP per capita divides the value of economic output in relation to the population. GDP is considered the best measure of how economic wealth is distributed among people.
Falling behind is not expected to be a temporary state, as the projected growth of the Philippines will continue to lag behind Vietnam in the next five years.
The IMF sees the Philippines’ GDP at US$4,805.84 by 2025 as compared to Vietnam’s US$5,211.90. This means that the gap between the two countries will continue to widen in the foreseeable future.
The Duterte administration may, therefore, have to abandon its goal of the country attaining middle-income status this year, after it failed to contain the Covid-19 pandemic within its borders.
After seven months of various forms of quarantine – considered as the longest and toughest in the world – business and consumer confidence remain low in the Philippines.
Worst of all, wide swaths of the new middle class which have been forced back to poverty level existence are expected to remain there until the government can fully recover.
Sonny Africa, executive director of think tank IBON Foundation, told local media that “Vietnam responded very well to the pandemic and was able to keep growing, even if at a slower rate.”
In contrast, Africa said the Duterte administration’s “poor and tepid response” caused “the worst economic collapse in the country’s history.”
National Economic and Development Authority head and concurrent Socio-economic Planning Sec. Karl Kendrick Chua did not comment.
Africa said he was not surprised that the Philippines was falling behind Vietnam. The two economies had been taking diverging paths of late, he said. Because of this, the Philippine economy will likely shrink by 8.6 percent this year, while Vietnam will probably grow by 1.6 percent.
Calixto Chikiamco, president of the Foundation for Economic Freedom – composed of a group of former finance secretaries –said the Philippines was being left behind because of the slow pace of reforms, notably the opening up of the economy to more foreign investments.
Chikiamco told local media, “Vietnam has more capable institutions, have been very aggressive in liberalizing rules for foreign investment, and have adopted the correct strategy of focusing on improving agricultural productivity, light manufacturing growth, and exports.”
Vietnam’s exports, he pointed out, “are 100 percent of GDP, while ours is only a third. Cheap food enables them to give reasonable wages with high purchasing power, powering growth in their manufacturing sector.”
It should be noted that Finance Sec. Carlos Dominguez recently questioned what he said was the failure of the Department of Trade and Industry, specifically the Board of Investments, to entice more foreign investors to the country, especially those who were leaving China in favor of such countries as Vietnam.
Dominguez also said the investments offered by the Trade department were not as inviting as those offered by neighboring countries.
The chief economist of the Union Bank of the Philippines said Vietnam had successfully contained the Covid-19 pandemic far better than the Philippines.
Ruben Carlo Asuncion said faster coronavirus containment by Vietnam made all the difference. The country even stopped a second wave of infections and lifted a three-week lockdown recently.
He said, “Even before Covid-19…Vietnam had been on a higher growth trajectory than the Philippines. It cannot be denied that Vietnam has done a better job so far in containing the coronavirus.”