Losing steam?
Election years have historically kicked up our economy’s growth by 2-3 percentage points. In the election years of 2004, 2007, 2010, 2013 and 2016, first quarter gross domestic product (GDP) growth was 6.2, 7.0, 8.4, 7.7 and 6.9 percent, respectively, against an average of only 5.0 percent in the nonelection years since then.
For the first time since the turn of the century, we’re seeing an election year start off with the economy slowing down (5.6 percent), the first time in at least two decades it has grown below 6 percent—when we should be seeing a growth upsurge. Why so? Is the economy finally losing steam, after growing above 6 percent for seven years in a row?
A lot of money goes around the economy running up to elections. Much cash comes into circulation out of hidden or unhidden bank accounts held here and abroad. It also comes out of government coffers; from private cash hoards hidden in safes, chests and cartons; or even from illegal money printing machines. A major money counterfeiting operation was actually caught by the National Bureau of Investigation before the 2013 midterm elections.
All that money buys campaign posters, streamers and tarps; radio, TV and newspaper ads; land, sea and air transport services for candidates and their entourage; hotel and other accommodations; T-shirts, caps, fans and umbrellas emblazoned with candidates’ names; show-business personalities’ talent fees; salaries and wages of campaign workers; food and meals consumed and given away during the campaign, and yes—to buy people’s votes directly.
On the government side, the Commission on Elections (Comelec) reportedly budgeted about P16 billion for the conduct of the 2013 midterm elections. Government at both national and local levels also has the tendency to boost infrastructure spending in the run-up to elections, for obvious reasons.
So why is the economy now chugging along with a mere 5.6 percent growth, when it should have been within 7-8 percent based on past election years’ experience? Government points to the delayed passage of the 2019 budget as the main culprit, given that it was already well into the second quarter when the lawmakers’ squabble over the pork barrel was finally resolved. But was it really mainly the delayed budget that slowed things down, when government spending actually accounts for a mere 13 percent of aggregate GDP on the spending side? Or is the economy generally slowing down, with or without the budget delay that slowed down government spending?
Closer examination of the GDP data suggests that there’s much more to the slowdown than the budget delay. Based on sectoral composition, this year’s slowdown from the same quarter last year happened in agriculture, fishery and forestry (from 1.1 percent last year to an even more dismal 0.8 percent this year), and in industry (from 7.7 percent last year to only 4.4 percent this year). The slowdown in agriculture was driven by 4.5 and 2.1 percent contractions in rice and corn, respectively, along with falling production in key export crops like banana, mango, coffee and rubber.
Most disturbing to me is the slowdown in the manufacturing sector, which had grown at an average of 7-8 percent annually since 2010, but whose growth has weakened since the second quarter last year (now 4.6 percent). Food manufacturing, the single largest subsector therein, actually sped up from 5.8 to 10.6 percent, but the next largest subsector composed of electronic equipment and apparatus dramatically slowed from 16 percent growth last year to a mere 1 percent this year. Manufacturing fell in furniture and fixtures, office equipment, nonelectrical machinery, rubber and plastic products, and petroleum refining. Meanwhile, services, the largest sector in the economy comprising 60 percent of total GDP, actually speeded up from 6.8 to 7 percent growth.
Lower government spending alone couldn’t have induced much of those slowdowns and contractions. It’s time that our leadership recognized that bad governance and politics are taking their toll on the economy, and with them, people’s wellbeing. I could only hope that the choices we made in yesterday’s elections would help change that.
