Wilma C. Inventor-Miranda l December 18, 2024 l Business Mirror
The year 2024 is almost over and there are so many global events happening in the world today that makes us wonder how these will affect the economy in 2025.
The continuing tensions in the Middle East and Ukraine, climate change, technology evolution and elections next year–how will governments and its leaders move towards economic growth in 2025?
An editorial by Rich Karlgaard for Forbes magazine (November 11, 2024) discussed the “Proven Growth Formula” and suggested that global leaders explore “fresh frameworks to move forward, survive and thrive.” Karlgaard also listed some key growth ingredients that global leaders might as well consider. And the list includes education, rule of law, pro trade, ease of starting a business, stable money, simple and flattish tax and non-punitive regulations.
I agree with Karlgaard’s list as well as his view that there is no one magic formula but a hundred of other factors to consider.
Education is first on the list because I believe skills and talents are needed to improve production efficiency and as a foundation for economic growth. To do this, more development efforts are needed in this area. This factor is also mentioned in the Economic Outlook of Organization for Economic Cooperation and Development (OECD) issued last December 4 of the need to enhance effort in the development of education.
Rule of law is also important because investors need to know if they can trust the justice system before they bring in their investments. This is obvious, since, of course, businesses want to make sure the legal environment is fair and predictable before they risk their money to investing in a certain country.
In the Philippines we have some developments in the ease of doing business; but there is a lot more room for improvement. Investors do not want to go through” red tape” or longer processes and to accomplish huge number of requirements such as filling out many forms, less automated systems, longer time for approval, etc.
One example of non-punitive regulations cited in the editorial is when Germany shut down their nuclear power plants as a political statement and relied on their natural energy requirements on Russia, which is not a good economic decision. As a consequence, German companies, which include renowned auto manufacturers and chemical producers, pay among the world’s highest electricity costs. The political statement they want to show the world along with punitive regulations has adversely affected their economic growth.
In the Philippines, President Ferdinand R. Marcos Jr. met with South Korean President Yoon Suk Yeol last October and signed a memorandum of understanding on the feasibility study of Bataan Nuclear Plant (Eco-Business, October 14, 2024). In that same article, Ronald Daryll E. Gatchalian, science research specialist and one of the only known nuclear engineers in the country, said that nuclear power is safe as long as it follows international standards. Since wind and solar are intermittent in nature, without nuclear energy, baseload power will be dominated by carbon fuels, which will not lower carbon emissions.
Furthermore, Marcos recently signed the Create More law that will push, among others, for the establishment of a more efficient approval process by raising the investment capital approval threshold for investment promotion from P1 billion to P15 billion. In other words, any amount below the threshold does not need to go through the Fiscal Incentives Review Board for approval. The law contains other several other measures to attract investors and help spur economic growth.
Morgan Stanley forecast that overall global growth will remain at 3.2 percent in 2025, but softening to 2.8 percent in 2026. Each global leader may have different strategies to how they can grow their economy and if there is a need to have a paradigm shift in order to have fresh new ideas and respond to the changing times.
In every decision, some risks have to be taken. But at the end of the day, the buck stops right at the leader’s desk.
***Wilma Miranda is the Managing Partner of Inventor, Miranda & Associates, CPAs, Member – Board of Directors of KPS Outsourcing Inc. The views expressed herein do not necessarily reflect the opinion of these institutions and the BusinessMirror. Photo from Pinterest.