Analysis

Growth as an Indicator of Crisis

The third-quarter growth in the GNP and GDP does not indicate progress. Upon closer scrutiny, the supposed evidence of prosperity becomes the proof of scarcity.

By DANILO ARAÑA ARAO
Bulatlat.com

Analyzing the third-quarter 2003 data on the gross national product (GNP) and gross domestic product (GDP), one wonders why the Macapagal-Arroyo administration is euphoric over their growth by 5.9% and 4.4% respectively

While these are significantly higher than the previous year’s third-quarter data (i.e., 3.1% for GNP and 3.8% for GDP), there is a need to know where the growth came from. Only then can one realize the speculative and short-term nature of this economic growth, as well as quantify the chronic crisis the country is going through.

Cellular phone-driven growth?

As in the past, the services sector accounts for 43.0% of total GDP, followed by industry (33.2%) and agriculture, fishery and forestry (16.2%).

Services also had the highest growth in the third quarter of this year, posting 5.6% as against agriculture, fishery and forestry’s 5.5% and industry’s 2.3 percent.

This situation is peculiar since economic theories (particularly the Kuznets model) posit that agriculture, fishery and forestry should initially have the highest share in the GDP. The industry sector takes over when the country is on its way to industrialization. When a country becomes industrialized, the services sector can account for the highest share in GDP due to, among others, the higher purchasing power of consumers and the establishment of various service centers to accommodate their needs.

That agriculture, as in the past, fails to significantly contribute to GDP growth proves its backwardness not only in terms of production but also technology. This also reflects the government’s skewed concept of industrialization where increased agricultural productivity is not a factor for development as long as imported agricultural products are accessible. This then explains the government’s thrust for the liberalization of agriculture despite the opposition of peasants.

As regards services, the communications subsector spearheaded the growth with 11.6 percent. No less than the National Statistical Coordination Board (NSCB) admits that this was due to “strong consumer demand for wireless communication.”

The NSCB reported that the focus of service providers is the provision of the “latest mobile services such as enhanced multi-media messaging, higher resolution video, web browsing and data transmission to its consumers.”

As of 2001, there are 12.1 million cellular mobile telephone service subscribers. Given the country’s 80-million population, this means that about one out of every seven Filipinos avail of mobile telephone services and presumably own cellular phones.

While some economists see nothing wrong with this economic activity, it cannot be denied that the remarkable growth in communications is speculative and even short-term.

Demand for cellular phones and wireless communication services could plummet anytime, especially if the Macapagal-Arroyo administration’s past proposal to impose taxes on short message service (SMS) to raise more revenues would push through.

It may be interesting to note that the prohibitive cost of multi-media messaging service (MMS), as well as the relatively high cost of MMS-enabled phones, had already made MMS less popular among cellular phone subscribers.

Needless to say, the recent growth is communications is untenable.

Insignificant Manufacturing

Economists argue that economic growth will only be meaningful if the industry sector, particularly the manufacturing subsector, posts sustained, double-digit growth.

In theory, growth in manufacturing results from the expansion of economic sectors and industries. Not only does growth in manufacturing mean more capital for entrepreneurs, but also this, more importantly, translates to more job opportunities for Filipinos.

According to NSCB, manufacturing posted a negligible 4.4% growth during the third quarter of this year. Data from the National Statistics Office (NSO) on the first and second quarter of this year show that manufacturing grew by only 5.3% and 4.1% respectively.

OFW-driven growth?

The Macapagal-Arroyo administration acknowledges the significant contribution of remittances of overseas Filipino workers (OFW). The NSCB explains that net factor income from abroad (NFIA) posted a “robust growth of 28.4% from a negative growth of 6.2% a year ago” and this provided the “much-needed boost to the economy.”

In 1997, OFW remittances amounted to $5.37 billion. It grew significantly in 1998 ($7.37 billion), decreased slightly in 1999 ($6.79 billion), 2000 ($6.05 billion) and 2001 ($6.03 billion), and substantially increased again in 2002 ($7.2 billion).

The Bangko Sentral ng Pilipinas (BSP) admits that the “increase in OFW remittances reflected in part the increase in the number of Filipinos leaving to work abroad .”

In 2002, the number of OFWs was estimated at five million. At present, independent estimates claim that OFWs number around eight million.

Statistics That Matter

The minuscule growth in manufacturing could explain the 12.7% unemployment rate as of July 2003, which means that 4.3 million Filipinos aged 15 to 65 years old are unemployed. Of the total unemployed, about 28.6% or 1.2 million are aged 20 to 24 years old, mostly fresh college graduates.

Even the 29.8-million employed Filipinos are not necessarily assured of regular income, since only 16.1 million (53.9%) are wage and salary workers. The rest are own-account workers (10.6 million or 35.6%) and unpaid family workers (3.1 million or 10.5%).

To make things worse, those who get regular income have to make do with low minimum daily wage rates currently ranging from P140 or $2.51 (Autonomous Region in Muslim Mindanao or ARMM) to P280 or $5.02 (Metro Manila). (The dollar conversion assumes an exchange rate of P55.73 per US dollar.)

As of October 2003, data from the National Wages and Productivity Commission (NWPC) show that the family living wage ranges from P368 or $6.60 (Eastern Visayas) to P727 or $13.04 (ARMM). This amount is necessary for a family of six to fulfill food and non-food needs in one day. (For details, please refer to a related article at URL https://www.bulatlat.com/news/3-42/3-42-workers.html)

It does not come as a surprise that news about the GNP and GDP growth was not warmly received by cause-oriented groups and largely ignored by the masses as they try to make ends meet given the lack of job opportunities, low income and high cost of living.

There is no indication of a better life ahead, but even more uncertain times as the country braces for another election year in 2004.

Indeed, the growth in the GNP and GDP does not indicate progress. Upon closer scrutiny, this ironically reflects the persistent social crisis. Bulatlat.com

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