Unforgiving economy

The neglected economic sector is unforgiving in its demand that the two-year-old Aquino administration lift its game to deliver the desired economic results. It is holding the government accountable for its poor economic performance after the economy grew by 3.7 percent in 2011, down from 7.6 percent in 2010 before it took office.

The sector stepped up the clamor to hold the Aquino administration accountable for the sluggishness early in its term, even as it noted that the government was showing extraordinary zeal in pursuing its anti-corruption campaign aimed at sending to jail past administration officials accused of corrupt practices. The clamor for better results in the economy heightened amid the current impeachment trial of Chief Justice Renato Corona, who is associated with the reviled Arroyo administration, and who bears the brunt of the anti-corruption drive. The clamor has emphasized the theme that the economy required more, if not equal, attention than the anti-graft campaign, because the economy produces wealth while the clean-up drive has produced no economic benefits and nothing more than slogans and motherhood morality nostrums on honesty and poverty-eradication.

Following the disclosure of the dip in the GDP for 2011, the International Monetary Fund exhorted the government to spend more on public infrastructure to support any expansion in economic activity.

In a press conference in Washington D.C., Anoop Singh, director of the Asia and Pacific department, said, “our estimate is that the Philippines, in (terms of) the medium term growth potential targets, will be within target…and even higher.” But, the main point is, in order to achieve the country’s potential growth, it needs more investments especially in public infrastructures, he said. Philippine government statistics show that a 3.7-percent GDP growth in 2011 was merely half of the government’s target of 7.0-8.0 percent for 2011-2016. President Aquino did not appear concerned about the drop in the growth rate and did not indicate he would push his economic managers to boost expansion.

The IMF has twice downgraded its growth forecast for the Philippines since December. It said the country might achieve 4.2 percent growth in 2012, lower than the 4.9 percent announced in September. In April, the outlook was a higher 5 percent.

Last month, the IMF’s updated World Economic Outlook downgraded the forecast for the Asean-5 bloc, of which the Philippines is a member, to 4.8 percent, 5.2 percent and 5.6 percent, for 2011, 2012 and 2013, respectively, from September’s 5.3 percent, 5.6 percent and 5.8 percent, respectively.

“The global recovery is threatened by intensifying strains in the euro area and fragilities elsewhere,” the Outlook said. “Financial conditions have deteriorated, growth prospects have dimmed, and downside risks have escalated.”

In early January, the Joint Foreign Chambers of Commerce in the Philippines, presented a monograph, titled Arangkada Philippines 2010,  which said the country has to move “twice as fast” to catch up with the growth of the region.

“The biggest challenge facing the Philippines is to move the economy to a higher level of growth and creation,” the report said. “Per Capita Income (PCI) barely grew during the 1980s and 1990s with boom-bust cycles triggered by political events and high population growth. Of the Asean-6, for the past five decades, the Philippines had the lowest GDP and PCI growth.” But since 1999 through mid-2010, the real GDP growth averaged 4.6 percent, raising the PCI from $1,019 to $1,748 in over a decade.

“Philippine growth has not been inclusive. In 2006 there were 24 million poor Filipinos, about the same percentage of the population as in 1986. By contrast, the other Asean-6 countries eliminated or reduced it by half. In the fast-growing Asian region, the Philippine economy is becoming relatively smaller in share of total GDP among the Asean-6. In 1960, the (Philippine PCI) was second to Japan. In 2009, the Indonesian PCI passed the Philippines, as Vietnam is projected to do in 2014, which will make the Philippine PCI the lowest among the Asean-6.

“With a labor force of 38 million, up to 50 percent since 1990 and projected to reach 54 million by 2030, creating new jobs and giving students and workers needed skills are major challenges. Combined unemployment and underemployment rates exceed 25 percent, and 43 percent of the workforce is in the informal sector. The government has called for an industrial policy to create 15 million quality jobs, reducing unemployment to the regional average and ending underemployment.”

On the infrastructure policy environment, the sorest spot in the sketchy economic agenda, the monograph said, “The Philippines significantly underinvested in physical infrastructure, with spending averaging 2 percent of GDP, far below regional norms.  In the Global Competitiveness Report, among the Asean-6, the country’s overall infrastructure quality ranks below Singapore, Malaysia and Thailand, and close to Indonesia and Vietnam.”

With these enormous economic catchup problems and challenges, the Philippines is bogged down on cleaning up its political and judicial system without a blueprint for accelerating economic growth. The current political leadership shuns economic priorities and loathes to do its homework.