The Philippine Economy in 2009: Bruised and Battered by Myths and Hype

By SONNY AFRICA
Bulatlat.com

MANILA — If there is anything good that came out of 2009, it should be a radical rethinking by the government of its economic policies.

The worsening crisis experienced by the country last year exposed the Philippine economy’s over-reliance on external sources of growth even as globalization exacerbates the country’s internal economic weakness and vulnerability. The country’s jobs and livelihood crisis continued to worsen even as the onset of a renewed fiscal crisis forebodes additional burden on the people in the years to come. Amid the unfounded hype about a global economic recovery, the challenge for Philippine development remains to be in the direction of defying the imperialist globalization offensive and genuinely building the domestic economy.

There is a sense in which the world can be said to have changed in the post-global crisis period. In particular are two new global premises for domestic socioeconomic development policy. The first is an economic constraint: the export-led growth model is no longer feasible. The end of the era of debt- and bubble-driven consumption and investment in the United States (US), European Union (EU) and Japan means that they can no longer be engines of growth for the world economy. The so-called emerging markets are unlikely to provide an alternative engine especially insofar as their “emergence” has in many respects depended on the US, EU and Japan to begin with.

The second is an ecological constraint: the people are already feeling the impact of the pressures on the natural environment. Capitalist-driven economic activity has resulted in unsustainable levels of production that has incongruously seen excessive consumption by a few and the deprivation of many. Climate change and global warming have been many decades in the making and the many decades needed to remedy this cannot happen under current profit-driven economic activity.

These two new global premises and their adverse effects have been tragically felt by the Filipino people in 2009.

Globalization-induced Decline

The economy last year has been misinterpreted and misrepresented especially by the government as showing a supposed resiliency. In particular, it has been proudly declaring that the economic growth is still positive, albeit low. Preliminary data from the National Statistical Coordination Board (NSCB) showed year-on-year gross domestic product (GDP) growth in the first three quarters of 2009 collapsing to just 0.7 percent from 4.2 percent in the same period in 2008 and 7.3 percent in 2007. In turn, seasonally adjusted quarterly growth, which corrects for seasonal variations to allow comparisons between consecutive quarters, slowed to 1.0 percent from 1.7 percent in the second quarter.

But it is also important to look at growth in the context of the country’s growing population — and indeed how the benefits of economic growth have not been felt by the majority of the population. Here the economic decline is even clearer and growth in GDP per capita — i.e., GDP divided by the population representing economic output per person — has been negative for three consecutive quarters already. Year-on-year per capita GDP growth has been slowing since the second quarter of 2007 and negative since the start of 2009, shrinking 1.2 percent in the first three quarters from the same period last year. This indicates a general decline of overall domestic productive and income-generating capacity in an economy that is already backward and inequitable to begin with.

“Resiliency” moreover implies a capacity to rebound and, indeed, a prior desirable condition to rebound. Unfortunately, the country has neither of these. Globalization, since the 1980s, has eroded domestic agriculture and industry, which are supposed to be key internal sources of growth. (Considerable migration and remittances have, in part, compensated for this but their limits are already emerging.) Conditions were also poor to begin with: record sustained unemployment, in both absolute numbers and jobless rates, which inevitably increased and deepened poverty.

If anything, the Philippine economy’s globalization-induced decline accelerated in 2009. At the onset of intensified global crisis in 2008, the share in GDP of manufacturing (23.1 percent) in the economy had already shrunk to as small as it was in the 1950s and agriculture (18.1 percent) to its smallest in the country’s history. The situation deteriorated further in the first three quarters of 2009 with manufacturing’s share in the economy falling even lower to 18.5 percent and of agriculture to 15.5 percent, according to NSCB data on the production side of the national income accounts.

On the expenditure side, the share of investments (i.e., capital formation) also continued its long-term decline and fell to 14.8 percent of GDP — drastically down from peaks of around 30 percent in the 1980s and 25 percent in the 1990s. This diminishing investment stimulus in part explains the lack of internal dynamism of the economy and further jeopardizes its prospects for sustainable economic growth.

These problems have been due to crisis-driven declines in exports — especially low value-added electronics exports but in all likelihood also of Business Process Outsourcing (BPO) service exports –- and in overseas remittance growth. As a whole, according to national income accounts data, goods and services exports have been contracting since the last quarter of 2008 and have fallen by 15.5 percent in the first three quarters of 2009.