The\nlast debris from the fireworks and firecrackers have been cleaned up.\nNow everyone is starting to look ahead to what\u2019s up for the economy\nand the people in 2020. What are the prospects based on the Duterte\nadministration\u2019s policies and how the economy performed in 2019?<\/p>\n\n\n\n
The traditional optimism at the start of every New Year is all-important because problems chronically pile up in the course of the Old Year. It is a vital defense mechanism rekindling hope and renewing strength. Both are needed, more than ever.<\/p>\n\n\n\n
The\nDuterte administration has been busy making the economy even more\npro-business and pro-profit, notwithstanding some yearend\nanti-oligarch posturing. This was at the expense of the people and\ntheir welfare. A few populist social measures were a smokescreen to a\nweakening economy, persistent structural poverty, and deteriorating\nsocial services. \n<\/p>\n\n\n\n
Slowing\ngrowth<\/strong><\/p>\n\n\n\n The\neconomy has been on a downward slide since the start of the Duterte\nwatch. Gross domestic product (GDP) growth of 6.9% in 2016 slowed to\n6.7% in 2017, 6.2% in 2018, and then just 5.8% in the first three\nquarters of 2019. \n<\/p>\n\n\n\n Economic\ngrowth is falling further and further below the administration\u2019s\noriginal target 7-8% in its Philippine Development Plan (2017-2022).\nThe target was lowered to 6-7% but growth is still not reaching even\nthat. Growth had averaged 6.2% over the 2010-2015 period under the\nprevious Aquino administration.<\/p>\n\n\n\n The economy is slowing despite the best efforts of the economic managers at debt-driven pump-priming. Public spending keeps increasing and, measured relative to GDP, is already at its highest in over 15 years. The Php3.4 trillion in national government expenditure in 2018 was equivalent to 19.6% of GDP or the highest level since 2002.<\/p>\n\n\n\n Part\nof the increased spending is financed by higher taxes on the poor\nfrom the Duterte administration\u2019s regressive Tax Reform for\nAcceleration and Inclusion (TRAIN) program. These have not been\nenough though and the fiscal deficit is still slowly increasing. The\nPhp558 billion deficit last year was equivalent to 3.2% of GDP or the\nhighest in almost a decade. \n<\/p>\n\n\n\n The deficit is financed by growing debt. On average, the Duterte government is borrowing almost three times as much as the Aquino government and over twice as much as the Arroyo government per month. The outstanding debt of the national government is growing at an average of Php49 billion monthly \u2013 compared to Php19 billion under Aquino and Php21.2 billion under Arroyo \u2013 and was Php7.9 trillion already as of October 2019.<\/p>\n\n\n\n Growing\nspending<\/strong><\/p>\n\n\n\n The\nbiggest driver of economic growth is government spending. The most\nvisible and hyped is for infrastructure development. Public\ninfrastructure disbursements have soared from Php537 billion in 2016\nto Php890 billion in 2018, reaching the equivalent of 5.1% of GDP.\nAppropriations for infrastructure are even higher at some Php900\nbillion in 2019 and Php1.2 trillion in 2020.<\/p>\n\n\n\n But\nthe government has also been putting money into the economy in other\nways. These include some Php125 billion in cash transfers for the\ncountry\u2019s poorest households \u2013 consisting of the Pantawid\nPamilyang Pilipino<\/em>\nProgram (4Ps) conditional cash transfers and the TRAIN-related\nunconditional cash transfers. Hiked public hiring and salary\nincreases have increased government personnel expenses to Php1.1\ntrillion in 2019.<\/p>\n\n\n\n Government\nspending is however a short-term measure and unsustainable. It is\ndependent on the availability of revenues. Debt-financing also has it\nlimits. Moreover, spending on infrastructure cannot go on\nindefinitely. At some point, additional infrastructure spending is no\nlonger financially or economically viable.<\/p>\n\n\n\n Weaker\nproduction<\/strong><\/p>\n\n\n\n On\nthe other hand, strong agriculture and robust Filipino industry are\nthe more reliable and sustainable sources of growth. They expand\nemployment, increase the purchasing power of the vast working\nclasses, and can build domestic productive capacity for future\ngrowth.<\/p>\n\n\n\n Yet\nagriculture and manufacturing are both weakening. Though it slightly\nrecovered to 1.5% growth in the first three quarters in 2019 from the\n0.9% slowdown in 2018, the agriculture sector continues its general\ndecline in terms of its share in the economy and employment. There\nwas an increase in fishing and aquaculture work but the agriculture,\nhunting and forestry subsector continued to shrink.<\/p>\n\n\n\n This\nwill only worsen with the implementation of the rice liberalization\nlaw last year. Designed to drive rice prices down to discourage rice\nfarmers from planting and harvesting, the law threatens to displace\nas much as 250,000 to 350,000 of the country\u2019s least productive\nfarmers. Millions of rice farmers and their families are already\nsuffering collapsing incomes from drastically lower palay<\/em>\nbuying prices. Rice imports are growing and food security is eroding.<\/p>\n\n\n\n The\nso-called manufacturing resurgence has apparently petered out.\nManufacturing slowed drastically from 8.4% growth in 2017 to 4.9% in\n2018 and just 3.7% in the first three quarters of 2019. The sector\neven shed around 56,000 jobs by the end of the year, falling to 3.6\nmillion employed.<\/p>\n\n\n\n The\nchances of a manufacturing recovery are slim. The sector is overly\ndependent on foreign firms producing for a global market. The world\nis however still grappling with a protracted slowdown and increasing\nprotectionism. Government\u2019s industrial policy is meanwhile still\noriented to attracting low value-adding foreign investors instead of\nstrengthening Filipino industry. \n<\/p>\n\n\n\n The\ngovernment\u2019s debt-driven stimulus is a weak boost to manufacturing.\nFor instance, much of high-value construction inputs and even many\nrelated services are imported rather than produced locally by\nFilipino firms. The import-dependence of existing manufacturers and\nconstruction firms are the main reasons for the trade deficit\nreaching record highs under the Duterte administration.<\/p>\n\n\n\n A\nfew service sectors are the biggest centers of wealth creation. The\ncountry\u2019s oligarchs including the president\u2019s closest big\nbusiness allies continue to amass wealth not from production but from\ntrading, real estate, hotels and restaurants, utilities, and related\nfinancial services. Yet these are not the sectors vital for long-term\ngrowth and development.<\/p>\n\n\n\n Disguised\njobs crisis<\/strong><\/p>\n\n\n\n Agriculture\nand manufacturing are falling and failing to create the jobs needed\nby the growing population. Tens of millions of Filipinos are instead\nforced either abroad or into all sorts of erratic and low-paying\nservice work.<\/p>\n\n\n\n In\nthe October 2019 labor force round, the government reported a surge\nof 1.8 million additional employed and unemployment falling to 2.1\nmillion. Taken at face value, this is welcome but does not indicate\nlong-term development taking place.<\/p>\n\n\n\n New\njobs created were overwhelmingly in wholesale and retail trade,\ntransportation and storage, and construction. These sectors can be\nprofitable for a few economic elites but however do not create the\neconomic base needed for long-term growth and development;\nagriculture and Filipino manufacturing are needed for that.<\/p>\n\n\n\n The\nquality of work created is revealing and reflects the limits\nespecially of backward service sector work. Three of four new jobs\nwere in part-time work of less than 40 hours per week; the number of\nthose who worked without pay also continued to increase.<\/p>\n\n\n\n Official\nunemployment figures moreover underreport the true state of\nunemployment. IBON\u2019s initial estimate is of some 4.1 million\nunemployed Filipinos or more than double the officially reported.\nThis higher figure includes discouraged workers and others\nimmediately unavailable for work that the government has stopped\ncounting.<\/p>\n\n\n\n Disguised\npoverty<\/strong><\/p>\n\n\n\n Among\nthe biggest economic news last year was the reported decline in\npoverty in 2018 to just 12.1% of families and 16.6% of the\npopulation, corresponding to 3 million families and 17.6 million\nFilipinos.<\/p>\n\n\n\n This\ndecline in poverty is however illusory in using a very low poverty\nthreshold of Php71 per person per day on average, or just Php10,727\nper month for a family of five. This is officially deemed enough for\nFilipinos to meet their food and non-food needs and no longer be\npoor.<\/p>\n\n\n\n Setting\nsuch a low income standard obscures how the conditions of tens of\nmillions of Filipinos are not fundamentally improving. For instance,\nthe same family income data would show that 12.4 million Filipino\nfamilies or over half of the population actually tries to survive on\njust Php132 or much less per person per day.<\/p>\n\n\n\n The\nlow \u2018poverty threshold\u2019 also does not capture so many other\ndimensions of poverty that tens of millions suffer: income\ninsecurity, lack of decent work, lack of education, insufficient\nnutrition and poor health, inadequate housing, lack of clean water,\nsanitation and electricity, degraded ecology, lack of assets,\nexploitation and other vulnerabilities.<\/p>\n\n\n\n Official\nincome poverty figures, like for unemployment, need to be revisited\nto reflect rather than obscure key socioeconomic realities especially\nfor the country\u2019s poorest and most vulnerable. Statistical\nmisdirection will only reinforce economic problems. \n<\/p>\n\n\n\n Economic\nmissteps<\/strong><\/p>\n\n\n\n It\nis natural to expect the economy to serve the needs of the majority\nrather than of just a few. By that standard, the optimism of the\neconomic managers that \u201cthe Philippine economy is strong and ready\nto soar\u201d is misplaced. \n<\/p>\n\n\n\n The\neconomy is slowing and its most important sectors are weakening.\nPoverty and unemployment are high but concealed by misleading\nofficial statistics.<\/p>\n\n\n\n Still,\nthe administration has spent the past year, and will spend this year,\npursuing the sorts of policies that distort the economy and thwart\ndevelopment. It is out to complete the liberalization of agriculture\nstarting with rice last year and the sugar industry this year.\nAgricultural livelihoods and food security are at stake.<\/p>\n\n\n\n It\nis so keen on foreign investment that it is surrendering vital policy\nspace for national industrial development. Amid growing worldwide\nprotectionism, the Duterte government is still doggedly seeking\nforeign investment liberalization \u2013 in utilities, retail trade, and\neven wholesale charter change if it can.<\/p>\n\n\n\n There\nwas a show of anti-oligarch rhetoric particularly around Metro Manila\nwater services. But the government\u2019s insistence on water\nprivatization not just in the capital but the rest of the country\nmeans that water barons will remain and only get richer. \n<\/p>\n\n\n\n The\ngovernment is also pressing to make the tax system even more\nregressive, pro-rich and pro-capital. The TRAIN law\u2019s Package One\nburdening poor consumers with higher consumption taxes is entering\nits third year. The rich who TRAIN favored with lower taxes on their\nincome and wealth are set to get even more tax cuts with subsequent\npackages lowering corporate income taxes and taxes on capital and\nfinancial investments, among others.<\/p>\n\n\n\n Optimism\nand hope<\/strong><\/p>\n\n\n\n The\nDuterte administration knows that people sense if their conditions\nare really improving or not. That disappointment easily leads to\nrestlessness and, eventually, greater protest, and even revolution.\nLast year, it started to pay more attention to managing unrest from\nan economy that was making a handful rich while keeping the majority\npoor and unemployed. \n<\/p>\n\n\n\n There\nwere populist social measures to take the edge off underdevelopment.\nThere was also insistent propaganda that the economy is getting\nbetter. There was also notably a crackdown on activists pointing out\nsocial problems and consistent in proposing the radical solutions\nneeded but opposed by economic elites. \n<\/p>\n\n\n\n Organized groups have long been advocating concrete measures and far-reaching reforms to build an economy that keeps on improving the lives of the many. The economy is heading in many wrong directions but the possibilities of People Economics to replace bankrupt neoliberalism gives much reason to be optimistic. Things will not get better on their own, and the administration\u2019s fears are well-founded \u2013 more and more Filipinos are going to spend the New Year standing up to change things for the better. ###<\/p>","protected":false},"excerpt":{"rendered":" The optimism of the economic managers that \u201cthe Philippine economy is strong and ready to soar\u201d is misplaced.<\/p>","protected":false},"author":3,"featured_media":8896,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_exactmetrics_skip_tracking":false,"_exactmetrics_sitenote_active":false,"_exactmetrics_sitenote_note":"","_exactmetrics_sitenote_category":0,"footnotes":"","_expiration-date-status":"saved","_expiration-date":0,"_expiration-date-type":"","_expiration-date-categories":[],"_expiration-date-options":[]},"categories":[2048,3],"tags":[2130,347,2129,1463,116],"acf":[],"_links":{"self":[{"href":"https:\/\/www.ibon.org\/tl\/wp-json\/wp\/v2\/posts\/8889"}],"collection":[{"href":"https:\/\/www.ibon.org\/tl\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.ibon.org\/tl\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.ibon.org\/tl\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.ibon.org\/tl\/wp-json\/wp\/v2\/comments?post=8889"}],"version-history":[{"count":4,"href":"https:\/\/www.ibon.org\/tl\/wp-json\/wp\/v2\/posts\/8889\/revisions"}],"predecessor-version":[{"id":8911,"href":"https:\/\/www.ibon.org\/tl\/wp-json\/wp\/v2\/posts\/8889\/revisions\/8911"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.ibon.org\/tl\/wp-json\/wp\/v2\/media\/8896"}],"wp:attachment":[{"href":"https:\/\/www.ibon.org\/tl\/wp-json\/wp\/v2\/media?parent=8889"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.ibon.org\/tl\/wp-json\/wp\/v2\/categories?post=8889"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.ibon.org\/tl\/wp-json\/wp\/v2\/tags?post=8889"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}