The mixed views on the higher-than-expected economic growth for 2012 announced by the Aquino administration last week indicated that much has to be done to make development sustainable and its fruits available to all.
President Aquino knew days before the official announcement that the numbers would impress, and they did. The Philippine economy grew by 6.8 percent in the fourth quarter of 2012, bringing full-year growth to 6.6 percent. This topped the government’s target and the analysts’ expectations. The median forecasts of the World Bank and other institutions were 5.9 percent for the fourth quarter and 6.4 percent for the full year. The Philippines’ economic growth in the fourth quarter of 2012 can very well be the second fastest in Asia after China’s 7.8 percent. It was also higher than Vietnam’s 5.4 percent and Singapore’s 1.1 percent.
Malacañang said the “exceptional” growth rate was proof of the country’s ability to move toward “equitable progress” on a policy of good governance. Budget Secretary Florencio Abad described it as “a resounding affirmation of the Aquino administration’s fiscal strategy, backed as it is by our robust macroeconomic fundamentals and, more importantly, the principles of good governance.” Mr. Aquino’s spokesperson Edwin Lacierda said that while the growth rate was initially driven by government stimulus, economic growth is now increasingly being driven by private-sector activity, including investments, which grew by 8.7 percent in 2012. “Private-sector activity has been enabled by the Aquino administration’s dedication to positive reform. Without doubt, good governance means good economics,” he said.
But some private economists observed that the lingering question was whether the high growth in the fourth quarter and the whole of 2012 could be sustained and translated into better incomes for many Filipinos. One reason for their tepid response may be the “low base effect,” meaning that the growth in 2012 was computed from a very low base in 2011. Economist Benjamin Diokno of the University of the Philippines, a former budget secretary, provided interesting data: Under President Corazon Aquino, the economy grew 6.8 percent in 1988 after weak growth in 1987; under President Gloria Macapagal-Arroyo, the economy grew 6.7 percent in 2004 after weak growth in 2003, and again by 7.6 percent in 2010 after a near-recession in 2009.
Diokno agreed that growth was strong in 2012, but said it remained to be seen if this would be sustainable. “We’ve seen this kind of growth before and [it was] not sustained. Is it inclusive? I’m afraid not,” he said, noting that agriculture’s contribution to GDP continued to shrink, posting the lowest growth among the three major sectors (industry and services are the two others). Citing October labor statistics, he said “the recent growth may be characterized as labor-shredding growth [as] close to a million jobs were lost.” Most Filipinos still depend on agriculture and related sectors for a living.
This is not to downplay the governance and economic achievements of the Aquino administration. But as Economic Planning Secretary Arsenio Balisacan said, the government should not be “lulled” into complacency by the economic achievements in 2012. “It is our immediate task to put in place policies and implement programs that will sustain our economy’s growth over the medium term. We shall continue planting the seeds of a structural transformation in our economy to make it more investment- and industry-led. This, in turn, will mean more jobs and employment opportunities of high quality for Filipinos, thus ensuring that growth is inclusive and benefits all sectors of society,” he said.
Cid L. Terosa of the University of Asia and the Pacific reiterated what economists had been advising previous administrations: The growth level of at least 6 percent can be maintained as long as the Philippines keeps building up productivity. Terosa also said the fourth-quarter and full-year 2012 growth rates were impressive, but it’s unclear whether those numbers will translate into better incomes for many in the years ahead. “Employment and continuous structural changes are keys to economic growth over the medium term,” he said.
Everyone seems to know this. It is, after all, a basic economic principle. Yet administration after administration has struggled—and failed—to keep the growth momentum going. The President and his economic team have a lot of work to do to change the pattern.