The Survival of the Arroyo Regime: Why Growth Hype Won’t Do the Trick
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Transcript of The Survival of the Arroyo Regime: Why Growth Hype Won’t Do the Trick
The Survival of the Arroyo Regime:Why Growth Hype Won’t Do the
Trick
IBON Birdtalk Midyear 2006July 14, 2006
What crisis?
• Broad-based economic growth
• Robust exports• Vibrant consumption• Strong business
confidence• Revenue surplus• Better debt
management• Lower unemployment
rate• Higher wages• Lower inflation rate• Reduced poverty
incidence
What growth?• Prices of basic goods &
services continue to soar
• Wages & incomes continue to fall way below the cost of living
• Joblessness & economic displacement are worsening
• Government remains heavily indebted
• Poverty is worse than ever
We have strong macro-economic
fundamentals.
Source: National Statistical Coordination Board
6.2%7.0%7.2%Services
5.5%3.4%4.5%Industry
3.8%-0.5%8.1%Agriculture, Fishery, & Forestry
5.5%4.2%6.5%GDP
5.8%4.9%7.4%GNP
200620052004Indicator
GNP & GDP 1st Quarter Growth Rates, At Constant 1985 Prices
Source: National Statistical Coordination Board
6.2%7.0%7.2%Services
5.5%3.4%4.5%Industry
3.8%-0.5%8.1%Agriculture, Fishery, & Forestry
5.5%4.2%6.5%GDP
5.8%4.9%7.4%GNP
200620052004Indicator
GNP & GDP 1st Quarter Growth Rates, At Constant 1985 Prices
The GNP & GDP are growing at a
faster rate.
Source: National Statistical Coordination Board
6.2%7.0%7.2%Services
5.5%3.4%4.5%Industry
3.8%-0.5%8.1%Agriculture, Fishery, & Forestry
5.5%4.2%6.5%GDP
5.8%4.9%7.4%GNP
200620052004Indicator
GNP & GDP 1st Quarter Growth Rates, At Constant 1985 Prices
… and we had a broad-based
economic growth.
Source: National Statistical Coordination Board
6.2%7.0%7.2%Services
5.5%3.4%4.5%Industry
3.8%-0.5%8.1%Agriculture, Fishery, & Forestry
5.5%4.2%6.5%GDP
5.8%4.9%7.4%GNP
200620052004Indicator
GNP & GDP 1st Quarter Growth Rates, At Constant 1985 Prices
• Recovery from contraction
• Palay & corn production remains erratic
• Gap between rice farm gate & retail prices
• Influx of imports
Agri Trade Balance
(per year)
1980-95: $0.65B
1995-04: ($1.03B)
2005: Rice -
(499,897 MT)
Behind the growth in agriculture...
Source: National Statistical Coordination Board
6.2%7.0%7.2%Services
5.5%3.4%4.5%Industry
3.8%-0.5%8.1%Agriculture, Fishery, & Forestry
5.5%4.2%6.5%GDP
5.8%4.9%7.4%GNP
200620052004Indicator
GNP & GDP 1st Quarter Growth Rates, At Constant 1985 Prices
• Manufacturing value of production increases while volume falls (Factory output down by 14%; 14 out of 20 sectors posted slashed production)
• Firms closing down or reducing workforce are increasing
Behind the growth in industry...
Firms resorting to closure or retrenchment daily
22 2
76 6
8
99
6
8
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 b
b - Jan to Jun only Source of basic data: BLES
Between 1995 & 2000: average 4 firms daily
Firms resorting to closure or retrenchment daily
22 2
76 6
8
99
6
8
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 b
b - Jan to Jun only Source of basic data: BLES
Between 2001 & 2005: average 8 firms daily
Source: National Statistical Coordination Board
6.2%7.0%7.2%Services
5.5%3.4%4.5%Industry
3.8%-0.5%8.1%Agriculture, Fishery, & Forestry
5.5%4.2%6.5%GDP
5.8%4.9%7.4%GNP
200620052004Indicator
GNP & GDP 1st Quarter Growth Rates, At Constant 1985 Prices
• Growth continues to slow down
• Telecomm. Growth slowing down largely due to monopolization
• BPO, call centers unable to reverse trend
• Burning out? Not surprising due to lack of industrial & agricultural base
And behind the growth in services...
Indicator2004-
052005-
06GNP 4.91% 5.79%GDP 4.23% 5.52%Personal Consumption Expenditure
4.95% 5.07%
Government Expenditure 2.19% 9.39%Capital Formation -8.88% -2.68%Exports 1.36% 12.22%Less: Imports -2.18% 0.62%
GNP & GDP 1st Quarter Growth Rates, By Expenditure, 2004-2006
Source: NSCB
Spending is up, exports grew by more than 12%!
Indicator2004-
052005-
06GNP 4.91% 5.79%GDP 4.23% 5.52%Personal Consumption Expenditure
4.95% 5.07%
Government Expenditure 2.19% 9.39%Capital Formation -8.88% -2.68%Exports 1.36% 12.22%Less: Imports -2.18% 0.62%
GNP & GDP 1st Quarter Growth Rates, By Expenditure, 2004-2006
Source: NSCB
Amid stagnant wages & incomes,OPH & VAT,this could only be spurredby OFW remittances:$10 B (annual ave.);$3.7 B (as of April);8% of GNP
Indicator2004-
052005-
06GNP 4.91% 5.79%GDP 4.23% 5.52%Personal Consumption Expenditure
4.95% 5.07%
Government Expenditure 2.19% 9.39%Capital Formation -8.88% -2.68%Exports 1.36% 12.22%Less: Imports -2.18% 0.62%
GNP & GDP 1st Quarter Growth Rates, By Expenditure, 2004-2006
Source: NSCB
“Economic pump priming”?
Or
Cha-cha?
Indicator2004-
052005-
06GNP 4.91% 5.79%GDP 4.23% 5.52%Personal Consumption Expenditure
4.95% 5.07%
Government Expenditure 2.19% 9.39%Capital Formation -8.88% -2.68%Exports 1.36% 12.22%Less: Imports -2.18% 0.62%
GNP & GDP 1st Quarter Growth Rates, By Expenditure, 2004-2006
Source: NSCB
Industrialization?Neocolonial trade: • export-oriented but import-dependent• mere assembly hub• manufactured exports comprised 90% of total exports but semi- processed raw mat’ls & intermediate goods comprised 39%
Indicator2004-
052005-
06GNP 4.91% 5.79%GDP 4.23% 5.52%Personal Consumption Expenditure
4.95% 5.07%
Government Expenditure 2.19% 9.39%Capital Formation -8.88% -2.68%Exports 1.36% 12.22%Less: Imports -2.18% 0.62%
GNP & GDP 1st Quarter Growth Rates, By Expenditure, 2004-2006
Source: NSCB
Far from industriali-zing as capital formation continuesto fall
563.7
710.8
567.1
777.9
626.1
826.5
699.8
884.4
783.2
963.2
0
100
200
300
400
500
600
700
800
900
1000
P Billion
2001 2002 2003 2004 2005
Source: Department of Finance
NG Fiscal Position, 2001-2005
Revenues
Expenditures
-180-184.6-200.4-210.8-147.1Deficit
At least the budgetdeficit is falling.
Artificial increase in revenues by P21B
Fiscal Stability: At what cost?
Burden is on the people:1. Higher taxes, fees, rates and charges
• 2005: “Sin taxes” (P15 B), petroleum tariffs (P29 B), govt fees/charges (P17 B), power rates (P112 B)
• 2006: Increased VAT (P97-105 B)
2. Government lay-offs• 2005: 10,000 less gov’t workers• 2006: thousands more to be laid-off (with
P10 B for separation pay); target - 450,000 government workers for retrenchment
3. Cutbacks in social services
Better debt management? Total external debt is
$57.2 billion, 67% public; 57% from commercial credit; 73% of the GDP
Total outstanding national govt debt is more than P3.9 trillion (As of Feb 2006), almost half in foreign currencies
Total outstanding public sector debt is P5.1 trillion, 94% of the GDP
Govt borrowed P302B (Jan-Jul ’06), 78% used to pay for maturing debts
Still driven by debt Revenues increased by
12%, expenditure by 9% while debt service burden increased by 13%
For every P10 in revenues, P9 goes to debt servicing
Debt service burden accounts for 74% of the national budget
Arroyo is biggest borrower, biggest payor, best US client
Selected NG expenditures, 1986-2006p (P billion)
125.649164.5
205.396 227.843274.439
357.959
470
542.2
674.114721.668
0
100
200
300
400
500
600
700
800
1997 1998 1999 2000 2001 2002 2003 2004 2005p 2006p
Year
P bi
llion
Total debt serv ice
Education
Health
Housing
Defense
Declining REAL spending for social services 2001-2006 (CPI, 2001=100):
Debt service is 101% higher
Education is 5% lower
Health is 19% lower
Defense is 11% higher
Source: NSO
36516,66116,296 Wage & salary worker
13912,44012,301 Own-account worker
2983,9223,624 Unpaid family worker
By type of worker
05,2365,236 Industry
37816,36915,991 Services
42711,42010,993 Agri, fishery, forestry
By sector
80333,02431,221Total employment
Diff.April 2006
April 2005Indicator
Employment indicators in the Philippines (In thousands)
But I have created jobs!
Source: NSO
36516,66116,296 Wage & salary worker
13912,44012,301 Own-account worker
2983,9223,624 Unpaid family worker
By type of worker
05,2365,236 Industry
37816,36915,991 Services
42711,42010,993 Agri, fishery, forestry
By sector
80333,02431,221Total employment
Diff.April 2006
April 2005Indicator
Employment indicators in the Philippines (In thousands)
Employment grew by803,000 betweenApril 2005 and
April 2006
Source: NSO
36516,66116,296 Wage & salary worker
13912,44012,301 Own-account worker
2983,9223,624 Unpaid family worker
By type of worker
05,2365,236 Industry
37816,36915,991 Services
42711,42010,993 Agri, fishery, forestry
By sector
80333,02431,221Total employment
Diff.April 2006
April 2005Indicator
Employment indicators in the Philippines (In thousands)
No new jobs generated in the industry sector
Source: NSO
36516,66116,296 Wage & salary worker
13912,44012,301 Own-account worker
2983,9223,624 Unpaid family worker
By type of worker
05,2365,236 Industry
37816,36915,991 Services
42711,42010,993 Agri, fishery, forestry
By sector
80333,02431,221Total employment
Diff.April 2006
April 2005Indicator
Employment indicators in the Philippines (In thousands)
365,000 additional jobs for wage & salary workers: driven by demand of BPO, callcenters
Source: NSO
36516,66116,296 Wage & salary worker
13912,44012,301 Own-account worker
2983,9223,624 Unpaid family worker
By type of worker
05,2365,236 Industry
37816,36915,991 Services
42711,42010,993 Agri, fishery, forestry
By sector
80333,02431,221Total employment
Diff.April 2006
April 2005Indicator
Employment indicators in the Philippines (In thousands)
While unpaid familywork & self-employment continue to accountfor a significant portion of jobs created: 437,000 or 54% of total
Number of Unemployed & Underemployed Workers, 1996-2006 (Annual Average)
8,000
8,500
9,000
9,500
10,000
10,500
11,000
11,500
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Source: National Statistics Office
In '
00
0
19968.3 M
20018.7 M
2006
11.3 MNo. of jobless & underemployed grew by:
1996-2001: 66,666 per year
2001-2006: 433,333 per year
Unemployment rate annual average (2001-2005) of 11.4% - highest among all Philippine presidents
Daily, 158 workers (private sector) become jobless Privatization & rationalization to displace 450,000
government employees Plus 8-9 M OFWs whom can be considered as
unemployed; 3,000 workers go abroad daily Plus gov’t attempts to distort (reduce) unemployment arbitrary exclusion from labor force: new definition of
joblessness (April 2005): “not looking for work = not unemployed”
In reality, job scarcity affects 43% of the labor force
The truth is, there is a serious lack of jobs & Arroyo has no effective program to address it
Cost of living versus minimum wage in NCR
1999 2000 2001 2002 2003 2004 2005 2006
Source of basic data: NWPC, BSP
P pe
r day
DCOL
Ave. min. wage
Gap
P675.54
P300.00
P375.54
No increase in minimum wage!
P457.86
P210.75
P247.11
Between 1999 and 2006…
5.993.98
9.507.03
42.74
36.24
05
1015202530354045
P per Liter
BeforeDeregulation
Start of Deregulation
Present Price
Source of Basic Data: DOE
Comparative Pump Price of Gasoline & Diesel Before & Under Deregulation
Gasoline
Diesel
The price of diesel is now 9X its price while that of gasoline is now 7X its price before deregulation.
16.5613.82
42.74
36.24
05
1015202530354045
P per Liter
Start of Arroyo'sterm
Present Price
Source of Basic Data: DOE
Pump Price of Gasoline & Diesel At the Start of Arroyo's Term & At Present
Gasoline
Diesel
The price of diesel & gasoline is now 3X their price since Arroyo became president.
Water Rates in Metro Manila, 1997-2006
0
5
10
15
20
25
30
35
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Source: MWSS Regulatory Office
P per cubic meter
Maynilad
ManilaWater
4.02
7.21
32.05
19.72
Since MWSS privatization (1997-2006):Maynilad rates grew by 344%Manila Water rates grew by 391%
Water Rates in Metro Manila, 1997-2006
0
5
10
15
20
25
30
35
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Source: MWSS Regulatory Office
P per cubic meter
Maynilad
ManilaWater
32.05
19.72
9.18
4.77
Since Arroyo became president (2001-06):Maynilad rates grew by 249%Manila Water rates grew by 313%
Economy is “growing” but it is not translating into improved living conditions for the people
Due to backward, pre-industrial economy: Worsened by globalization policies
Trade & investment liberalization Privatization & deregulation
Privatization & deregulation of electricity (NAPOCOR)
Privatization of Petron and deregulation of the oil industry
Privatization/commercialization of schools and universities; deregulation of tuition hikes
Privatization/commercialization of health services & hospitals
Privatization/commercialization of other basic social and economic services