Once again, the 3rd quarter results affirm why the country cannot and should not rely on external sources of growth.
The reported 6.5% growth in gross domestic product (GDP) in the 3rd quarter of 2010 is welcome for still being ositive but is nonetheless worrying for being the sharpest turnaround in quarterly growth since the Asian crisis over a decade ago. Research group IBON also said the growth is disturbing for being accompanied by a marked deterioration in the quality of work available, aside from grossly insufficient job creation.
The 6.5% 3rd quarter GDP growth is measured year-on-year and is a 1.7 percentage point drop from the revised 8.2% 2nd quarter figure. This is the biggest recorded drop between the 3rd and 2nd quarters in the past decade-and-a-half since the Asian crisis in 1997 where the closest falls were seen in 2004 and 2007 (1.5 percentage point drop), and 1997 and 2002 (1.3 percentage points).
Consecutive quarterly growth rates that are measured year-on-year are not strictly comparable but the conclusion is affirmed by looking at seasonally adjusted quarterly growth rates which are computed to allow comparison between consecutive quarters. Seasonally adjusted GDP contracted by 0.5% in the 3rd quarter which is a drastic 1.9 percentage point drop from the 1.4% growth in the 2nd quarter of the year. This is the worst 3rd quarter turnaround since 1997 when there was a 3.0 percentage point drop from 2.7% growth in the 2nd quarter to a 0.3% contraction in the 3rd quarter.
From a purely growth perspective, this drastic turnaround could be ominous if they indicate that the presumed drivers of growth in the economy are failing to deliver. The manufacturing subsector was the biggest contributor to growth, expanding 9.3% and contributing 6.3 percentage points to the final GDP figure. Yet this 9.3% growth continues a slowdown from 12.7% in the 2nd quarter and 20.4% in the 1st quarter – possibly showing the effects of the winding-down of stimulus programs especially in the US and Europe, both major export markets for manufactured products.
Once again, the 3rd quarter results affirm why the country cannot and should not rely on external sources of growth. Earnings of overseas Filipinos and from business process outsourcing (BPO) service exports are slowing in the first three quarters of 2010. Net factor income from abroad, mostly consisting of overseas Filipino incomes, only grew 10.3% compared to 31.6% growth in the same period last year. Business services growth, which includes BPOs, meanwhile slowed to 9.4% from 11.8% last year.
The employment situation however remains very poor and underscore how growth in the economy continues to be exclusionary. In July 2010, the labor force grew year-on-year by only 563,000 (1.5% growth) which is markedly less than the 1.09 million increase (2.9%) in the same period in 2009. Taken in the context of record-high unemployment rates for a decade now, this could indicate that more people have simply stopped looking for work that is not there to be found.
Some 777,000 jobs were reported created in July 2010 from the year before. Yet 377,000 of these were in the agriculture sector which saw a deep 2.5% contraction in the third quarter of 2010, which implies a drastic drop in average earnings in a sector already marked by widespread poverty. In contrast, the high-growth manufacturing sector created just 47,800 additional jobs.
The disjointedness of growth and decent jobs is also highlighted by the very poor quality of work generated. In July 2010, the number of own-account and unpaid family workers – or those in insecure, low-paying and even hazardous work – drastically increased by 1.12 million. There are now 12.6 million own-account workers and 4.3 million unpaid family workers. On the other hand, the number of wage and salary workers fell by 330,000. It appears that much of this is accounted for by the large drop in domestic household help whose numbers fell by 281,000, perhaps even indicating how households are increasingly unable to afford this.
The growth has also created mainly part-time jobs or work of less than 40 hours per week – accounting for 571,000 or three out of four (73%) of new jobs created in July 2010. While it was reported that underemployment has fallen, this is likely driven more by workers discouraged from finding additional work than reflective of the existing quality of work. (end)