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September 17, 2014 at 09:20 PM
The Philippine stock market has been riding high, and presently hovers above a 15-month high. Its young population and thriving economy have helped it avoid the fallout from the financial crisis. But that doesn’t mean the nation of islands is free of troubles—either for itself or for the global marketplace.
Strong consumption from a young and expanding population has kept the country’s economy thriving, and the government has set a target of 6.5–7.5% growth for this year. But two factors threaten that planned expansion, and the irony is that it’s at least partially because of the country’s own successful economy.
The first factor is traffic. Manila, the capital, is also the country’s busiest port. Busy ports mean lots of traffic, in addition to that presented by its population of 11.862 million. But traffic in the city of Manila had overwhelmed its roadways and become so nightmarish, with hours-long traffic jams, that the city government enacted a ban on trucks back in February. Trucks were barred from Manila’s roads between the hours of 5 AM and 9 PM. The city government rules the historic portion of the Metropolitan Manila area, which is much larger than the city proper.
The result, however, was not what the government had envisioned: with trucks shut out of the busiest port in the country for 16 hours a day, the port itself became so congested that it now threatens the country’s economy. Import growth slowed for two months in a row in both May and June, and prices started to rise on everything from consumer goods to food, thanks to traffic-induced supply chain problems.
The second factor is inflation. Food prices are now at a five-year high. Consumer prices are at three-year highs and inflation itself is at a 17-month high. Household consumption makes up 72.6% of the Philippines’ GDP, and rampant inflation could derail the country’s growth. The government is attempting to keep it at between 3–5 percent for the year, to keep its consumer-driven economy humming along at about the same pace as last year.
To try to solve the port backlog, the government has launched a “trade lane” into the port and tried to encourage shippers to use additional ports besides Manila. But the “trade lane” has its own traffic jams, and neither the traffic nor inflation problems have yet been solved.
