Was the GDP growth inclusive?By Mahar Mangahas |Philippine Daily Inquirer
Last Thursday, in its release of the national accounts for the second quarter of 2013, the National Statistical Coordination Board was pleased to announce that the Gross Domestic Product (GDP) had grown by over 7 percent per annum for the fourth consecutive quarter.
After dividing by the population and correcting for inflation, the NSCB found that per capita GDP, per capita Gross National Income, and per capita “household” final consumption expenditure grew by 5.8 percent, 5.0 percent, and 3.5 percent, respectively, between the second quarter last year and the second quarter this year. Such growth is quite fast; 3.5 percent per year means doubling after 20 years. Did most Filipinos share in it?
The question of whether the economic growth was inclusive cannot be answered by the present national accounts, which have only two classifications. One classification is by “value-added sector,” the production sectors being agriculture, industry, and services, with figures based on reports by production units, like farms, firms and the government itself.
Value added in production is income received by people engaged in it. To link it to various people’s incomes, data should be collected on sectoral payments to workers, managers, entrepreneurs, natural resource owners, and financiers (see my column “Focus on sharing the growth,” Inquirer, 2/2/2013). Since there are rich, middle-class and poor people engaged in every sector, there is no simple way to infer the benefits to the poor from the sectoral growth rates.
The second classification is by type of expenditure: “household” consumption, government consumption, capital formation, exports, and imports. Aggregate expenditure figures are obtained by netting out the foreign trade and then simply classifying products as either for consumption or for investment. (I put “household” in quotes because the data are only imputed to households, rather than collected from them.)
As presently constructed, the national accounts cannot distinguish the consumption of the poor, the middle class and the rich. The straightforward way for the government to see for itself if economic growth is inclusive is to survey household income and expenditures as frequently as it measures economic growth (see “Syncing poverty and growth statistics,” Inquirer, 6/8/2013).
Soon, perhaps in October, there might be a report on a government national survey about income and expenditures of households in the second semester of 2012, as a follow-up to its survey of the first semester of 2012. Another such survey is said to be in the pipeline for 2013—for completion and reporting in 2014—and then annually thereafter (see “The reform of official poverty statistics,” Inquirer, 5/4/2013). Only then will the government have its own data (but annual, not quarterly) to directly address the issue of inclusivity of economic growth.
Alternative surveys. The SWS quarterly tracking of poverty and hunger was instituted precisely to bridge the chasms between government figures on deprivation. In this year, the percentage of self-rated poor families fell from 52 in March to 49 in June, with a notable 8-point drop in the Visayas. The national trend is still flat, given the annual averages of 52 in 2012, 49 in 2011, 48 in 2010, and 49 in 2009 (see “Reading poverty news,” Inquirer, 8/10/2013).
On the other hand, the national hunger rate among families rose from 19.2 percent in March to 22.7 percent in June. Area-wise, the significant changes were an 11-point increase in the Balance of Luzon and a contrasting 12-point decrease in Mindanao. Since the average quarterly rate of national hunger has been 18 percent or more since 2007 (see “Stubborn hunger,” Inquirer, 8/17/2013), there is still no general improvement on this front. Moreover, the severe August flooding in Luzon may not give better news in the next SWS survey.
Historically, the key factors affecting poverty and hunger are not growth in GDP, but inflation, unemployment, and underemployment. The official figures for the latter two factors are 7.5 percent and 19.2 percent, respectively, for April 2013.
Within inflation, the price of food, especially rice, matters most. National data on general inflation are available monthly; in the first six months of 2013, it ranged between 2.6 and 3.2 percent, per annum. For the food group, a monthly retail price index for the National Capital Region (other areas not available) implies 1.9 percent inflation between June 2012 and June 2013. This is not really benign, due to a serious problem in the case of rice.
The Bureau of Agricultural Statistics has weekly data, for the Philippines, for well milled rice (WMR) and regular milled rice (RMR). At the end of August, the price of WMR was P38.11 per kg in 2013, versus P35.69 per kg in 2012, or 6.78 percent inflation between the two, and the price of RMR was P35.01 per kg in 2013 versus P32.56 per kg in 2012, or 7.52 percent inflation between the two. (Note: A Filipino ate about 309 grams of rice per day in 2010; see “Filipinos’ rice intake goes up as they cannot afford to buy meat, fruits—BAS,” Inquirer, 12/11/2011.)
Most of the price hike happened since the start of July. Converted by P44.50 to US$1, the latest WMR and RMR prices are $856 and $787 per metric ton, versus $538 in Thailand (indexmundi.com) and $412-$650 in Vietnam (importexportplatform.com). Ending the National Food Authority’s age-old legal monopoly on rice importation is long overdue.
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