Analysis

Economic growth under Aquino eludes poor

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For want of anything useful to say at the end of the Lenten holidays, President Aquino in his Easter message compared what he called the “resuscitation” of the Philippine economy under his watch to the resurrection of Jesus Christ more than 2,000 years ago.

When secular leaders of state mix up their metaphors with statecraft and religious matters, they are likely to get jammed into empirical data that undermine the accuracy of their claim on the condition of the economy.

When one claims “resurrection” of the economy, it implies that the President inherited a dead economy from the previous administration. Rather, he inherited a robust economy but squandered the opportunities to sustain growth.

The incontrovertible fact is that when P-Noy took office in June 2010, he inherited an economy that was growing at 7.6 percent. In just a year into his presidency, the gross domestic product (GDP) had contracted to 3.7 percent, described by the National Statistical and Coordination Board as “feeble” compared with the previous year’s banner expansion.

The slump was accounted for by P-Noy’s decision that sharply restricted state spending as part of a high-profile antigraft campaign seeking to ensure that all government contracts were free of corruption.

Budget Secretary Florencio Abad has admitted that a severe contraction in infrastructure spending hurt growth in the first three quarters, but contraction has been offset by huge capital outlays in the final three months of 2011.

In confirming the slower than expected growth in 201l, “held back by weak spending and external spending,” the World Bank’s Quarterly Update on the Philippine economy in March reported that an improvement of public finances and overall competitiveness would allow the economy to achieve rapid and sustained growth of above 5 percent for a long period of time.

However, the bank was keeping its 4.2-percent GDP forecast this year. But a 4-percent growth is deemed not good enough. The bank says the Philippine economy has to achieve growth higher than 5 percent on a sustained basis in order to improve the lives of the poor and catch up with its Southeast Asian neighbors. “A huge window of opportunity currently exists for speeding up critical reforms,” the World Bank said.

“Putting urgency into these (reform) will go a long way in boosting growth that benefits the poor,” the bank said. It’s opportune time for the country to come up to the next level. Whether Mr. Aquino can take advantage of this and push up the economy to a higher step to undertake reforms directed at reducing poverty depends on his attitude and assessment of the urgency.

Wrong presumptions

Based on his Easter message, there are grounds to believe P-Noy is making wrong presumptions. First, during his first year in office, his policy priorities (with anticorruption actions taking top priority) have led to nearly choking the economy.

Although these priorities have not stifled the economy to death, they strangled it to near death, so it’s ill-advised to be using such terms as “resuscitating” the economy which can only backfire on him when we consider his administration is mainly responsible for its slowed growth.

Having examined the impact of infrastructure underspending on economic growth, we now have to consider the relationship between growth and reduction of poverty.

In 2010, the National Economic and Development Authority approved the Philippine Development Plan 2011-2016 as the country’s economic roadmap. The plan aimed for “inclusive growth or growth that is shared by all and leaves no one behind.”

As such, “inclusive growth” is now the mantra, or a magic formula, for economic development parroted by officials and even the government’s partners in the public-private partnership projects, believed to be capable of producing results without much investment of public capital and tedious homework of projects.

Inequality worsened

The “inclusive growth” concept is presented as opposed to the “trickle down” approach to Third World development, fashionable in the 1970s, in the so-called “growth with redistribution” theories, to counter Marxist models of development, characterized by heavy state intervention in planning, investment and allocation of resources, and creation of employment.

How inclusive growth works in the Philippine economy has been the focus of studies by the World Bank Philippine Quarterly Update (PQU).

The PQU found that while “Philippine growth has been generally higher in the last decade,  poverty, inequality and labor market outcomes have not improved much.”

The report points out that more than a quarter of the population lives below the official poverty threshold and half the population is vulnerable to poverty. The middle class remains small at about 15 percent of the population in which about a third resides or works abroad.

Inequality has worsened in the last decade and the quality of employment remains weaker relative to the country’s potential when compared to countries with similar development.

Poor left behind

The incidence of poverty and hunger remains high, according to the PQU. “Independent surveys consistently show hunger and self-rated poverty incidences,” the report says.

“Incidence remained stubbornly high at around 20 percent in recent years, reflecting structural weaknesses in the labor market, with recurring spikes during the tail end of the typhoon season … In the December SWS [Social Weather Stations] survey, hunger incidence worsened 22.5 percent (1 percentage point higher than the previous quarter), equivalent to around 4.5 million households which experienced involuntary hunger.”

Inclusive growth has left the poor behind. No one speaks for them in this administration—unlike Hacienda Luisita, owned by the Aquino-Cojuangco political clan, which is embedded in the present regime.

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