Jojo A. Robles

Bubble, bubble

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Is Jesse Colombo the Anderson Cooper of the Philippine economic situation? And will the worldwide economic press that the Philippine government has long been using to paint a rosy picture of growth wise up, as well, to the propaganda?


There was a time when, in response to criticism at home, President Noynoy Aquino would cite the accolades his administration was supposedly reaping from the international press. The devastation caused by Typhoon Yolanda seems to have changed that strategy, especially after most foreign press outfits began unearthing the overall inept official response to the calamitous typhoon in Tacloban City and other hard-hit areas.

But the criticism about how the government mishandled the response to the typhoon ultimately concerned an isolated incident involving a once-in-a-lifetime natural phenomenon. It’s when the foreign press starts panning the economic policies of the Aquino administration that you start wondering if the truth behind one of the biggest lies being sold by this government (that of the efficacy of “Aquinomics”) is about to be exposed.

The latest online edition of Forbes magazine carries a column by renowned “bubbleologist” Colombo, the noted French-American economic analyst who correctly predicted the US housing and credit bubble that burst in 2008 and which has hobbled the world’s largest economy – and the rest of the world – ever since. Colombo’s piece, entitled “Why the Philippines’ economic miracle is really a bubble in disguise,” offers sobering reading for anyone under the impression that the local economy is an “emerging tiger” or whatever name Aquino currently uses to describe how swimmingly things are going on the economic front.

Colombo is of the opinion that the glowing financial indicators that Aquino and his economic managers love to highlight are merely part of what he calls the “emerging markets bubble” which is destined to “pop” because they are not really grounded on good fundamentals. Colombo believes that the Philippines and other emerging markets will implode and lead to “another crisis that is similar to the 1997 Asian Financial Crisis, [or] even worse this time due to the fact that more countries are involved (Latin America, China, and ­Africa), and because the global economy is in a much weaker state now than it was ­during the booming late-1990s.”

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In graph after graph, Colombo explains that the “scorching hot” money inflows to the Philippines had been borrowed from other markets like the US and invested here, where profit is greater. But, the analyst adds, all signs point to the existence of a bubble economy based on hot money which is spurring the growth in the stock market, consumer spending and even the real estate and construction sectors. 

Colombo predicts that the Philippines’ bubble “will most likely pop when China’s economic bubble pops and/or as global and local interest rates continue to rise, which are what caused the country’s credit and asset bubble in the first place.” He tracked the start of the Philippine bubble to the 2009 Chinese stimulus plan, instituted to counteract the effects of the global economic crisis; while the Chinese strategy temporarily boosted the local economy and those of emerging market countries, it also created “dangerous credit and property bubbles across the emerging world.”

Colombo notes, as Aquino does, that “the Philippines was upgraded to investment-grade status this year by all three major credit ratings agencies thanks to its booming economy and ultra-low government borrowing costs.” But he quickly adds that “a very good portion” of the improving indicators used to secure the upgrades was “due to unsustainable, credit-fueled economic growth.”

The Forbes columnist was also unimpressed by the effects of growth in both the business process outsourcing industry and the remittances from overseas Filipino workers. “These two popular explanations for the economic boom only account for a combined 14.8 percent of the Philippines’ economy, so are overstated in their impact, while the role of cheap credit and asset bubbles is greatly understated,” Colombo said.

Ultimately, what is disconcerting about Colombo’s analysis is his absolute certainty. It is not a matter of if the Philippines’ bubble economy will pop, he says, but how and when that will happen.

I haven’t seen an official response to Colombo’s economic analysis of the Philippine economy. I’d like to think that our officials are busy with the rescue, relief and rehabilitation effort in Tacloban and other places.

However, if the government does not respond to the Forbes story, it risks losing an important opportunity to explain that the bursting of the Philippine economic bubble isn’t as inevitable as Colombo predicts. After all, in response to allegations made by Cooper about the lack of official aid to the typhoon victims in Tacloban, Aquino gave his side of the story to anchor Christiane Amanpour.


Of course, Aquino’s explanations to CNN didn’t really change the minds of the foreign press – or those of many Filipinos – who remain convinced that the government’s overall response to the calamity was inadequate and inept. Still, Colombo has struck a blow to the very heart of the image Aquino likes to project – that of himself as a great economic manager whose greatest achievement is lasting and inclusive economic progress.

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