Trickle or trick
President Gloria Macapagal-Arroyo was said to have been euphoric Thursday as she announced the strong performance of the Philippine economy in the second quarter of the year. And quite understandably so. The economy, as measured by the gross domestic product, grew by 7.5 percent in the period from April to June, a growth rate that exceeded not only the government’s forecast of 6.6 percent but even the most optimistic expectations. It was, as Ms Arroyo proudly pointed out, the highest growth in any quarter in the past 20 years, keeping intact the series of successive growth during her six years in office. That is a record unmatched by any other administration, she added. And it came after an already healthy first quarter growth of 7.1 percent -- better than the 6.9 percent growth earlier estimated by the National Statistical Coordination Board.This is certainly good news for everyone but those who do not wish the Arroyo administration well. But can such growth, which is still slow by Asian standards, be sustained? Businessmen and economists, who were just as elated as the President was over this year’s economic performance so far, see the economy continuing to grow for the rest of the year, but at a slower pace. Ms Arroyo herself said the government would stick to its full-year growth target of between 6.1 percent and 6.7 percent, which means essentially the same as what the businessmen are seeing: a slight slowdown in the second half.
The reason is that some of the main drivers behind the unexpectedly robust growth in the second quarter will either become weaker or even be gone. Election-related spending, for instance, will no longer be there to boost consumption, which expanded by 6.0 percent during the quarter; and construction whose growth was propelled by a 39.6 percent increase in government spending on infrastructure. For the short term, mining is expected to power the growth of the industry sector as foreign investments continue to pour in, and business process outsourcing, which mainly involves call-center operations, should keep the growth in services healthy. But it is doubtful whether these two growth centers by themselves can pull the economy as a whole to a vigorous level of growth.
Giving her administration a pat on the back, the President declared that the remarkable performance of the economy showed that “our economic plans succeeded.” Said she: “No one thought that we could get more revenues, cut down on tax cheats, strengthen the peso and move the stock market. No one thought, we could bring our budget into balance, repay our debts and increase jobs, but we have done it.”
As far as those things are concerned, the review should be mixed. For one thing, the administration cannot claim all the credit for the stronger peso, without ignoring the more significant contribution of the inward remittances of overseas Filipino workers. Revenue collections may be higher in the last two years, but that is largely the result of the introduction of new tax measures, particularly the increase to 12 percent of the value-added tax. In fact, collections of both the Bureau of Internal Revenue (BIR) and the Bureau of Customs fell short of target during the first half of 2007, and now their chiefs are seeking lower collection targets for next year, even as the government seeks to increase its expenditure program to P1.227 trillion. True, a part of the country’s debts have been retired sooner than planned, but the government has not balanced its budget yet. Neither has it made a lot of headway in going after tax cheats as well as corrupt officials not only in the BIR and Customs but in the entire government bureaucracy.
Job creation? That is still one of the weakest points of the administration. Senate President Manuel Villar pointed out that 2.7 million Filipinos remain jobless while close to 6.4 million are holding either part-time jobs or jobs in which their education, training or talents are not being fully utilized. The bellwether of economic progress, he said, should be whether or not this army of unemployed and underemployed benefits from the growth being touted by the administration.
Apparently, years of growth has not opened more jobs or created the kind of jobs that put a little more food on the table for millions of Filipino families. Ms Arroyo has to do a lot more to ensure that the benefits of growth trickle down to those who need them most. Otherwise, as Villar put it, people might think they are being tricked to believe there is progress.
