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Duterte’s Midterm: Change for the Worse

July 22, 2019

by IBON Media

(IBON 2019 Midyear Birdtalk Briefing Paper economic situation highlights)

The country’s slowing economy, and worsening jobs crisis and poverty disputes the Duterte administration’s hype of economic gains. IBON said that this is bound to worsen if the Duterte administration continues unopposed on its current neoliberal trajectory wherein the interests of big foreign and local business prevail to the detriment of millions of Filipinos, especially the poor.

Economic growth slowing since the start of the administration.Philippine Statistics Authority (PSA) data show that gross domestic product (GDP) growth has been slowing in the 11 quarters since the start of the Duterte administration from 7.1% in the third quarter of 2016 to 5.6% in the first quarter of 2019. There was a momentary increase to 7.2% in the third quarter of 2017 but growth fell rapidly after this. Notably, growth was slowing even before the budget impasse and election ban on infrastructure spending.

High real unemployment. Computing according to the original definition of unemployment for comparability would show that the real unemployment rate in 2018 is 10.1% and the real number of unemployed is 4.6 million. These are much worse than the already high 9.0% unemployment rate and 4 million unemployed in 2016, again computed according to the original definition. In contrast, officially released figures for 2018 were a grossly underreported 5.3% and 2.3 million, respectively.

The record real unemployment last year is a direct result of how only an annual average of 81,000 new jobs have been created since the start of the Duterte administration, from 41.0 million employed in 2016 increasing by 162,000 to 41.2 million in 2018. To put this into context and even granting that the administration is just at its midpoint, this is so far the worst employment generation post-Marcos.

Lowest and least frequent wage hikes under Duterte. The Duterte administration is so far making the worst record on wage hikes of all post-Marcos administrations. In the NCR, for instance, it has only given an average of one wage hike every 18 months. The frequency of wage hikes previously ranged from one every 16 months under Arroyo to one every 10 months under Ramos. Over the two wage hikes under Duterte, the nominal value of the wage increased by only 9.4% – compared to a range of 11.5% by Benigno Aquino III to 45.9% by Corazon Aquino over their respective first two wage hikes.

Poverty underreported. IBON estimates on Family Income and Expenditure Survey (FIES) data in 2015 found that the poorest 50% or 11.4 million families had monthly incomes of just Php15,000 or less, and the poorest 60% or 13.6 million families just some Php18,000 or less.

Inequality worsening. The net worth of the country’s richest Filipinos and profits of the largest corporations continue to grow, in some cases even outpacing economic growth. The net worth of the 10 richest Filipinos grew from Php2.5 billion in 2016 to Php2.7 billion in 2018. The net worth of the 40 richest Filipinos grew from Php3.7 billion to Php3.8 billion in the same period. The net worth of the 40 richest as percentage of GDP was 21.9% in 2018.

Agriculture in crisis, manufacturing stalling. Agriculture has been left to perform chronically poorly. The sector grew by just 0.8% last year and in the first quarter of 2019. This is just around half the growth pace of 1.5% in the 2010s and not even a third of the 2.9% clip in the 2000s. Employment in agriculture has fallen by 1.1 million between 2016 and 2018, with an initial further 376,000 losses reported in April 2019 from the same period last year.

Manufacturing already appears to be stalling with growth of just 4.9% in 2018 – the slowest since 2012 – and slowing further to 4.6% in the first quarter of 2019. The share of manufacturing in total employment of just 8.8% in 2018 is actually even much lower than its 10.1% share in 1990 and 11% in 1990. These are despite the sector growing by 22.1% between 2016 and 2018, according to national accounts data.

Poorest land distribution. Lands covered by the Comprehensive Agrarian Reform Program (CARP) should have been distributed by 1998. This deadline was reset twice, yet until now 100% distribution has not been met. To add to this injustice, distribution is slow and is even going at a slower pace than before under the Duterte administration. Department of Agrarian Reform (DAR) land distribution accomplishment in the period 2016-June 2019 is just at an average of 2,920 hectares monthly. This is much less than under Benigno Aquino III (8,254 hectares, July 2010-2015), Arroyo (9,047 hectares, January 2001-June 2010), Estrada (11,113 hectares, July 1998-2000), Ramos (26,389 hectares, July 1992-June 1998), and Corazon Aquino (14,142 hectares, July 1987-June 1992).

Build Build Build, for whom?Over the 2016-2017 period, the biggest concentration of gross value in public construction was in Pres. Duterte’s home region of Davao (Region XI) accounting for 14.1% of the total. The increase in Davao is notable in almost doubling from 7.9% over the period 2010-2015 to 14.1% in 2016-2017. Close Duterte allies have reportedly been among the beneficiaries of the surge in Davao construction projects.

Mounting debt. The government is already borrowing heavily. Total outstanding debt of the national government stood at Php7.9 trillion as of May 2019 implying a total increase of Php2 trillion since the start of the Duterte administration. In nominal terms, this is equivalent to an average monthly increase in debt of Php56.2 billion, which is over two-and-a-half times that of the Arroyo administration (Php21.2 billion) and nearly three times that of the previous Aquino administration (Php19 billion).

Truth about TRAIN. The Duterte administration has tried to divert from the regressive nature of its tax reforms by repeatedly claiming that it benefits “99% of taxpayers” and giving the impression that 99% of Filipinos gain from TRAIN Package One. The reality however is that only 5.5 million personal income taxpayers coming largely from the highest income groups will gain from TRAIN’s personal income tax cuts. An additional two million taxpayers are minimum wage earners and so previously already exempt. On the other hand, the poorest 17.2 million or eight out of 10 (76%) Filipino families will pay TRAIN’s higher taxes on consumption goods including petroleum products and sugar-sweetened beverages. ###