Toward more inclusive economic growth
The Philippine economy grew by 7.6 percent in 2022, beating most expectations. However, some have expressed concerns about whether such growth is inclusive. President Marcos Jr. himself said the 46-year high growth is yet to be felt by Filipinos.
What is inclusive economic growth? The economy grows when a country’s gross domestic product (GDP), or the total amount of goods and services produced within its borders, increases. If we liken GDP to a pizza, economic growth means that the whole pie got larger. GDP growth becomes inclusive when each Filipino gets to enjoy a bigger slice of that larger pizza. Assuming that the pizza was cut equally, the slice for each Filipino was much larger in 2022 when the GDP per capita was P178,779. While this is lower than the P180,661 in 2019, it is higher than the P161,235 in 2020 when the pandemic started.
But pizzas are rarely cut equally in real life. Moreover, getting a bigger slice may not always mean that it is more delicious or more enjoyable. Is bigger better? Unsurprisingly, Filipinos consumed more of what they were deprived of during the pandemic lockdowns as the economy reopens. Philippine Statistics Authority data show that households spent 25.3 percent more on recreation and culture, and 27.8 percent more on restaurants and hotels in 2022 compared to 2021.
However, households now spend more on necessities and less on leisure. In 2019, 33.9 percent of households’ expenditures were for food and 11.6 percent were for other necessities like housing, water, electricity, and gas. These figures understandably jumped to 38.6 percent and 13.3 percent, respectively, in 2020, as most households had to prioritize their basic needs. In 2022, these slightly lowered to 37.4 percent and 12.7 percent, respectively. Meanwhile, households allocated 11.7 percent of their expenditures in 2019 for recreation, culture, restaurants, and hotels. In 2022, private spending on these was only 8.5 percent. It’s like getting a bigger pizza, but with less pepperoni and cheese.
Data from Social Weather Stations also suggest that fewer Filipinos are getting a bigger slice of the pie as self-rated poverty rose every quarter in 2022. Self-rated poverty was also higher last year (48 percent) than in 2021 (46 percent).While the whole country continues to face elevated prices, food inflation erodes the purchasing power of the poorest Filipinos more. Overall, prices of food were 14.1 percent higher in 2022. Specifically, meat was 25 percent more expensive in 2022 compared to 2019, followed by fish and other seafood (20.6 percent) and eggs (16.6 percent). While the price of rice decreased by 2.4 percent, vegetables were 24.4 percent more expensive than they were before the pandemic started.
A bigger slice for every Filipino. A first step to ensuring inclusive growth is addressing inflation as our people are less likely to consume more when prices are high. Addressing food inflation also allows Filipinos to spend their money on other goods and services aside from those needed to survive.
The ratification of our country’s membership in the Regional Comprehensive Economic Partnership is a step in the right direction. This will help fight inflation from the supply side as it gives the Philippines wider access to agricultural inputs and commodities.
Another good step is the administration’s prioritization of condoning the unpaid amortization and interest on loans of agrarian reform beneficiaries. The current bill can be improved by allowing farmers to sell or lease their land even to nonfamily members or rural entrepreneurs who can make agricultural land more productive. This would help make agricultural growth more sustainable as the average age of a Filipino farmer is now at 57 years old and the sector’s output is slower than population growth.
The Comprehensive Agrarian Reform Law should also be amended to allow land and farm consolidation. By increasing the five-hectare limit to 24 ha, farms will be more productive, viable, and competitive to increase both farmers’ income and agricultural output.
Second, growth will be more inclusive if there are more and better jobs in the country. This could be achieved by attracting more investments or firms to do business here, provide employment, and add to the number of productive citizens to fuel higher economic growth.
To attract more investments, the implementing rules and regulations of the amendments to the Public Service Act, which is now almost six months delayed, must be released as soon as possible.
Philippine ambassadors and attachés of the Department of Trade and Industry can also help by following up on investment pledges secured by the President during his foreign trips and by stepping up efforts in widely disseminating new incentives of doing business in the Philippines such as the Foreign Investments Act and the Retail Trade Liberalization Act.
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Gary B. Teves served as finance secretary under the Arroyo administration.
