Dec 5, 2012

Philippines - Philippine economy: growth without joy

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The 7.1 per cent Philippine economic growth in the third quarter “posted the fastest expansion” within the Asean (Association of Southeast Asian Nations), gloated Socioeconomic Planning Secretary Arsenio Balisacan.

He said that the year-to-date growth was already 6.5 per cent, prompting him to predict that the full-year growth would likely surpass the government’s target of 7 to 8 per cent. “Next year we expect this momentum to continue,” Balisacan said.

Don’t celebrate too prematurely, Mr. Secretary. In a volatile economic climate, either global or domestic, nothing remains static and predictable.

In fact, some leading figures in private business are not carried away by the government’s optimistic forecasts, given that the administration craves credit for being responsible for—or being the driver of—this unaccustomed surge, which appears to some hard-boiled businessmen as a one-off phenomenon, or a fluke.

For example, Aurelio Montinola III, president of the conservative and prudent Bank of the Philippine Islands, is somewhat sceptical. In a speech at the “Man of the Year” awards of the Management Association of the Philippines on Monday, he said that the 7.1-per cent growth made it likely that the pace of continued expansion at the upper end of the 5- to 6-per cent growth is attainable. “I think we have a very good chance to do 6 per cent this year, and the big bet is we can do another 6 per cent next year,” he said. To sustain growth and make it inclusive, it is necessary to have an average 5- to 6-per cent growth every year for the next five or six years.

Questions were raised in business circles over whether the high-growth rate benefited only the middle and upper classes while bypassing the poor classes. A recent survey of the Social Weather Stations (SWS) in the third quarter found 31 per cent of the 1,200 respondents optimistic of an economic improvement, while 14 per cent were not. SWS interpreted this result as “very high” at the net score of +17. The survey was conducted last August, and its results were first published by the BusinessWorld newspaper.

According to SWS, net economic optimism was “very high” in seven out of the last 10 surveys, and the August survey results were up from May’s “high” of +8. But there’s a downside. Asked about the quality of their life over the past 12 months, 21 per cent of the respondents said it had improved, while 28 per cent said it had worsened, for a net score of -8 percentage points.

Net personal optimism dropped from +39 to +30 in Luzon areas outside the metropolis, from +37 to +36 in Metro Manila, and from +18 to +17 in the Visayas. It only increased in Mindanao from +20 to +22.

By socioeconomic class, personal optimism decreased in classes ABC (from +34 to +32), class D (from +32 to +28) and class E (from +24 to +20). The Palace declined to comment on why personal optimism had dipped but said this should improve in the coming months, based on the third-quarter growth.

How economic growth translated into flow of benefits to reduce poverty is shown in a United Nations report for 2012. In its report on the growth outlook for Asia-Pacific, the Nations Economic and Social Survey of the region wrote on the Philippines. A summary of the May 2012 report follows:

Economic growth weakened due to declining exports and lower public spending, but in response to weak growth, a disbursement acceleration programme was announced in October 2011. In terms of foreign direct investment (FDI) inflows, the Philippines continued to lag behind other major economies in the subregion, receiving only $1.3 billion in 2011, similar to the 2010 level.

The country faces many challenges, including a high share of non-wage earners and large infrastructure gaps. The share of workers earning wages and salaries, as opposed to the self-employed and unpaid family workers, also remains low. At the same time, income inequalities have led to a slower reduction of poverty and to higher rates of self-rated poverty.

On government intervention in providing social subsidies to ameliorate poverty, an Inquirer research shows: As of June 2012, the Conditional Cash Transfer (CCT) programme has reached out to a total of 3,014,586 families, more than the 2012 target of 3 million.

Between January and February 2012, the programme reported a compliance rate of 95.89 per cent among mothers who visited the healthcare centres for checkups and immunisation for babies; 97.97 per cent among mothers who brought their children to healthcare centres for deworming; 95.15-per cent attendance rate in day care centres among children; and 96.40-per cent attendance rate for primary and secondary schoolchildren.

In May, SWS found that self-rated poverty dropped to an estimated 10.3 million Filipino households, or 51 per cent of the total households in the country. The figure declined from 11.1 million households, or 55 per cent.

The effectiveness of the CCT is under review in a congressional oversight committee: to look into whether it is being used as a poverty alleviation measure or as an electoral vote-buying scheme for the 2013 mid-term elections. Sen. Franklin Drilon, chair of the committee and a leading member of President Aquino’s Liberal Party, is scrutinising the 2013 national budget, which contains a proposal to fund the CCT with 45 billion pesos ($1.1 billion). The programme distributes money to the poorest families in the country.

Amando Doronila

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