A less than impressive economic performance

At last, the economic growth report for 2011 is out. Last year’s gross domestic product released by the National Statistical Coordination Board was a “feeble” 3.7 percent. The 2011 growth rate was less than half the previous year’s record 7.6 percent, and was below the government’s 5-6 percent target and 4.5-5.5 percent forecast.

The data painted a less than impressive picture of the Aquino government’s economic management performance in the first year of its administration. It raised questions of the priorities of its agenda of governance and what achievements it has made in the economic sector to be worthy of the mandate it received in the 2010 election which President Aquino won by a landslide.

The economic results of 2011 are particularly disturbing in the light of the government’s inordinate and excessive focus on engaging in punitive actions to make the officials of the corruption-ridden previous administration accountable for wrongdoing and abuse of power. The economic data highlighted growing criticism that the government has been neglecting and downgrading the importance of the economy, which has taken a back seat to the all-consuming drive against corruption focused on two specific issues: sending former President Gloria Macapagal-Arroyo to jail on charges of electoral sabotage and impeaching Chief Justice Renato Corona on charges of betrayal of public trust and corruption. Corona was appointed by Arroyo as chief justice weeks before Mr. Aquino took office in July 2010

The growth data stands as a rebuke to the government and shows that it is neglecting the economy and subordinating it to vindictive politics, while trumpeting it as part of the drive epitomized by the slogan, “Kung walang corrupt, walang mahirap.”  The data now call the government to arrange its priority to the economy which   is the sector capable of creating wealth, jobs and income for the poor to alleviate widespread poverty.

Government officials put up many excuses to explain the “feeble” growth of the economy. Romulo Viola, NSCB secretary general, said the government managed to generate growth despite “external economic problems, government under-spending on infrastructure in the second and third quarters, and the sustained decline in the fisheries subsector.”

Adding to the explanations was Socioeconomic Planning Secretary Cayetano Paderanga Jr. who said the government sped up infrastructure spending toward the end of 2011, making public construction expenditures grow 49.4 percent in the fourth quarter, a marked reversal from the contraction in the previous three quarters. Obviously the fourth quarter spurt was too late and not big enough to lift the growth for the entire year.

The officials traced the growth contraction to the decision of the President to restrict state spending when he took office in 2010 as part of his anti-graft campaign in order to ensure that all government contracts were free of corruption.

The government did not want for excuses to explain its economic underperformance. The inventive Paderanga said “a myriad of external shocks” hit the economy since the beginning of 2011 – from the political turmoil in the Middle East and North Africa that drove oil prices higher to the earthquake and tsunami in Japan and the flooding in Thailand that disrupted the global supply chain as well as the weakness of the world economy due largely to the recession in Europe and the United States.

The NSCB said the resulting contraction in exports was the biggest drag on the economy in 2011, which pulled down the GDP growth by 2.2 percentage points. Also blamed was public infrastructure  underspending and weak government  consumption, which shaved off about 0.7 percentage point and 0.2 percentage point, respectively, from GDP growth

To make matters worse, domestic disasters affected agricultural production and damaged infrastructure, cutting GDP growth. But it might be asked:  Against all these drawbacks, what were the Aquino administration and its economic managers doing – just lying supinely on their backs, looking for excuses to explain the poor economic performance? They have proved to be more prolific in finding excuses than in producing results.

An economist at the University of Asia and Pacific, Cid L. Terosa, did not accept the explanations.  “Negative events really pulled down growth last year but declines in construction and government spending could have been mitigated by the government itself,” Terosa said.

Neda assistant director general Ruperto Majuca told reporters that without the negative factors, the GDP could have grown by 7.1 percent in 2011. This is wishful. Economies do no expand by pumping them with hot air.

Majuca said the Philippines should be able to grow at a faster clip starting 2012 because, fiscal reforms which affected spending in the 2011, had been completed and public spending could be accelerated.

One sector of private business was not terribly impressed by these claims and the extraordinary effort of the Aquino government to send Arroyo to jail and dismiss Corona from the Supreme Court. Eduardo Francisco, new president of the Management Association of the Philippines, scored the “paralysis” of the administration resulting from the demands of economic growth and its anti-corruption campaign. He said a balance between the need to accelerate growth and promote good governance was needed to be struck by the government.

“While we support the Daang Matuwid policy,” Francisco said, “there has been some paralysis and it’s time the government should get more things done,” other than hunting for the scalps of Arroyo and Corona. Will these trophies accelerate economic growth?