Third quarter growth results released recently by the National Statistical Coordination Board show that the economy is back to its trend of poor growth | By Sonny Africa
IBON Features – The weak third quarter growth results reported by the National Statistical Coordination Board (NSCB) do not only confirm the uncertainty of achieving the full-year growth rate that the government has been hyping in a bid to project optimism and confidence. They also expose, among others, the limits of relying on overseas remittances to fuel economic growth, and how the government’s so-called stimulus program is more exaggeration than reality.
The government’s stimulus program is clearly more propaganda than practice. Government consumption expenditure in the third quarter registered just 7.9% growth which is even smaller than the 11.8% recorded in the same period last year. The slight 16.3% increase in the non-debt national government budget in 2009 is an unremarkable increase that, for instance, is even less than the 20.8% increase in the election year 2007.
Even as the Philippine government says that the worst effects of the global economic crisis are over, the reliance on overseas remittances to boost private consumption remains problematic. Remittance growth has been drastically slowing and the 4.2% growth in remittances reported by the Bangko Sentral ng Pilipinas (BSP) in the first three quarters of 2009, reaching US$12.8 billion so far, is actually less than a third of the 17.1% growth rate in the same period last year and the slowest in eight years. Compensation inflows in the national income account, which reflect overseas workersí incomes, likewise slowed to 19.3% growth in the third quarter from 22.3% growth in the same period last year.
Moreover, reports say that the revised economic growth figures in the US could indicate a slow and fragile recovery from the global economic crisis, which will likely further affect OFW remittances as the economies in host countries continue to slow down and migrantsí incomes and social benefits fall.
Back to trend of poor growth
The third quarter growth figures reflect the basic long-standing fragility of the domestic economy and its increased vulnerability due to ‘globalization’. The economy is back to its trend of poor growth which worsened after the third quarter of 2008.
Seasonally-adjusted quarterly gross domestic product (GDP) growth – which corrects for seasonal variations to allow comparisons between consecutive quarters – slowed to 1% from 1.7% in the second quarter. Year-on-year GDP growth in the first three quarters of 2009 in turn collapsed to just 0.7% from 4.2% in the same period in 2008 and 7.3% in 2007.
Year-on-year per capita GDP growth has in turn been slowing since the second quarter of 2007 and has been negative since the start of 2009, shrinking 1.2% in the first three quarters from the same period last year. This indicates a general decline of overall domestic productive and income-generating capacity in an economy that is already backward and inequitable to begin with.
Poor manufacturing sector performance with the collapse of exports is a significant drag on the economy. The last six quarters have been of slowing then actually negative manufacturing sector growth, which fell further from negative 7.4% in the second quarter of 2009 to negative 7.6% in the third quarter. This underscores the need for domestically-grounded Filipino industry as the main engine of economic growth and the hazards of relying on transnational corporations (TNCs) in export enclaves.
The agricultural sector in turn is heading toward a markedly poorer full-year performance compared to 2008. The sector’s growth in the first three quarters is down to just 1.3% from 3.4% in the same period last year with the effects of the recent calamities not yet even reflected.
The service sector cannot substantially make up for this weak manufacturing and agricultural growth. The biggest contributor to growth was the trade subsector which grew 2.7% in the first three quarters of 2009 from 1.7% in the same period last year. However this is likely artificially boosted by spending of remittances by OFW families rather than fundamentally driven by local economic activity, incomes and earnings.
It is also worthwhile to note how the growth figures highlight the limits of the greatly hyped business process outsourcing (BPO) sector. The business services subsector which includes BPOs registered just 2.0% growth in the third quarter from 16.9% in the third quarter last year, with the first three quarters of 2009 slowing drastically to just 2.0% growth from 12.6% in the same period last year. Aside from being dependent on global; economic developments BPOs are a scant 2% of GDP, barely 1.1% of total employment, and weakly integrated in the local economy.
Yet even these initial figures cannot be taken at face value. It is significant to note that the government actually drastically revised its second quarter figures downwards with GDP growth for instance almost halved from the originally reported 1.5% growth in August 2009, which it used as the basis for claiming a “strong” and “resilient” economy, to just 0.8 percent.
These are all symptoms of a backward, low growth and low productivity economy. Amid a fragile global recovery, these underscore the problem of how the local economy can possibly generate sufficient jobs, livelihoods and incomes for its population in the absence of real social and economic reforms. IBON Features