“PHILIPPINE ECONOMIC growth likely slowed in Q3,” blared a news headline about a forecast attributed to a large investment bank, just a few days before the official data came out—announcing the exact opposite. It can be hazardous indeed to make fearless forecasts on the economy, especially when released shortly before official data are due to come out. But then again, most financial institutions had actually predicted a slower third quarter, only to be proven wrong with the third-quarter data showing a surprising 7.1-percent surge instead. This is well beyond what was already considered a surprising 6.4-percent growth posted in the first quarter. Economics has never been a precise science, and not even the most sophisticated mathematical or statistical tools can help when there simply are too many unknowns in the equation. (I must mention, however, the remarkable track record of my Ateneo colleague Dr. Louie Dumlao’s real business cycle or RBC model, part of the toolkit of the Ateneo Macroeconomic Forecasting Model or AMFM—even as he shuns making fearless forecasts with it. Even then, Dumlao’s model forecasts have also been way off once in a while.)
Contrary to popular forecasts, then, the Philippine economy actually sped up in the third quarter, whether compared to the previous quarter or to the same quarter last year. It was, as National Economic and Development Authority chief Dr. Arsenio Balisacan proudly observed, the fastest growth rate in Southeast Asia. Finance Secretary Cesar Purisima pointed out that the growth surge was achieved despite a 2.2-percent decline in mining, showing that there remains much scope for even more growth. He mentioned mining and Muslim Mindanao as “extra gears” that would further boost growth once “the regulatory environment for mining is rationalized” and “the peace agreement is completed and fully implemented.”
There are even more extra gears beyond those Purisima named that we could tap much more fully if we are able to set the policy and institutional environment right. I particularly refer to tourism, agriculture and manufacturing. All three sectors remain far from achieving their full potentials, which a combination of appropriate and strategic policy reforms, institutional improvements and public investments could unleash. These three sectors are particularly important because one could expect their growth to be much more widely shared than what we have so far seen. For us, “inclusive growth,” or economic growth that the wide mass of ordinary Filipinos can be part of and benefit from, remains an elusive goal.
Indeed, growth is not all that matters. I was disheartened when an employee from the Department of Trade and Industry in Mindanao recently asked me why she could not feel the benefit of the growing economy; she said she actually felt life had gotten harder than before. And her sentiment, I’m sure, is far from unique.
To understand the persisting challenge, one only needs to examine the latest job statistics. Between July 2011 and July 2012, the economy managed to generate only less than half a million (478,000) net new jobs, notwithstanding the economy’s impressive growth. In fact, we lost close to half a million jobs (493,000) in agriculture in the same period. This means that more than half of the new jobs generated in industry and services were negated by job losses on the farms. Alarmingly, the rate of underemployment jumped to 22.7 percent from 19.1 percent last year, and 17.9 percent in 2010. This translates to more than 2 million people added in the last two years to the ranks of the underemployed—i.e., those who had work, but feel the need to work more—with the bulk (1.45 million) arising within the past year alone. This tells us that the scourge of “jobless growth” remains very much with us. And it may be getting worse.
The above data would seem consistent with that from the Social Weather Stations, which reported a 29.4-percent unemployment rate for the third quarter, up from 26.6 percent in Q2. The SWS figure appears to reflect the combination of unemployment and underemployment from the official data, where it turns out being “employed” is defined much more liberally. There, working even for just one hour during the reference period is enough to get a worker counted in the statistics as employed—whereas such people would probably describe themselves as jobless to the SWS survey taker.
As for tourism, agriculture and manufacturing, their advantage lies in being able to employ workers with relatively less training and education than in most other sectors and industries in the economy. This is important because more than two-thirds of the nearly 3 million jobless Filipinos had not gone beyond high school, with half of them having dropped out somewhere along the way. In recent years, both domestic and foreign tourism have grown substantially (by 24 and 9.4 percent respectively in 2010-2011); further growth especially in the latter would be unleashed by more open skies and aggressive investments in world-class facilities. In agriculture and agribusiness, further growth would entail fundamental institutional and budgetary reforms. Meanwhile, deliberate promotion and strengthening of small and medium enterprises nationwide would boost the ongoing resurgence of manufacturing.
It is welcome news that our economy has grown faster than most expectations, and fastest in the neighborhood. But there is little to celebrate about—and government certainly cannot rest easy—until that lady from the DTI, and millions of other Filipinos like her, would attest that life is indeed getting better.