ANALYSIS: Can the people taste economic growth?

Jose Galang – Your Business

Posted at Jan 23 2018 11:20 PM

If the just announced economic growth in 2017 were to be gauged in terms of improvement in people’s living standard, then it can be said that the Duterte administration’s economic managers still have a long way to go to achieve their promised goals.

Not only was the growth rate slower than the previous year, it also failed to keep unemployment and poverty in check. Even the pace of family spending has not been sustained, putting under a cloud the prospects of a more comfortable life with the newly unveiled regime of excise taxes.

Buoyed by a speedier expansion in mainly by agriculture and forestry, along with a late surge in manufacturing, the government’s estimate of the value of all goods and services produced in the country last year expanded by 6.7 percent in real terms last year, slower than the 6.9 percent in the preceding year.

Of the 12 major sources of growth by industrial origin monitored by the Philippine Statistics Authority, higher growth rates were recorded last year only in manufacturing, agriculture and forestry, along with public administration and defense, and compulsory social security (up 7.6 percent from 7.2 percent) and financial intermediation (up 7.7 percent from 7.6 percent).

Lower growth rates were registered in industry sub-sectors mining and quarrying; construction; electricity, gas and water supply; and service sector sub-groups transport, storage and communication; trade and repair of motor vehicles, motorcycles, personal and household goods; real estate, renting and business activities services. The fishing sector posted a contraction of 1.0 percent, an improvement over the previous 4.3 percent decline in output.

Families spend less faster

With the population growing to 104.9 million during the year, the national output, as measured by the gross domestic product, translated to a slower per-person increase of 5.0 percent in 2017, compared to 5.2 percent in 2016.

The slower GDP growth also tamed the rate of increase in family spending at 4.1 percent, compared to 5.2 percent in 2016 and 4.6 percent in 2015. While the growth in spending on food and non-alcoholic beverages was unchanged from the year before, there were slower spending increases in miscellaneous goods and services and contractions in clothing and footwear, along with alcoholic beverages and tobacco.

Households also experienced escalated rates of increases in spending on housing, water, electricity, gas and other fuels, on furnishings, household equipment and routine household maintenance, as well as on restaurant and hotel stays.

In contrast, government consumption spending in 2017 roared ahead, with the fourth-quarter expenditures ballooning by 14.3 percent in the fourth quarter alone, compared to the year-ago rate of increase of 4.5 percent. This was due largely to the year-end bonus and cash gift of government employees, the release of performance-based bonus of some agencies, and the filling up of various positions in government offices, including the police and military.

Meanwhile, an average quarterly rate of 46 percent of Filipino families rated themselves as “poor” in 2017, compared to 44 percent in 2016, according to the Social Weather Stations (SWS). Food-poor families stood at 32 percent, the same as the year-ago level.

A separate SWS survey last December showed 15.9 percent of families surveyed said they experienced “involuntary hunger” at least once in the preceding three months. The December hunger rate reversed a previous drop to 9.5 percent in June 2017.

Unemployment apparently also worsened somewhat in 2017. According to latest data available from the Philippine Statistics Authority, the number of unemployed Filipinos increased to 2.37 million as of July 2017, from 2.33 million the year before. Over 49 percent of the unemployed were in the 15-24 age group and another in the 25-34 bracket. More than 21 percent were college graduates.

More imports equals higher growth?

The Duterte economic managers are pinning their hopes of future growth on the robust increase in imports—still high at 17.6 percent even if this was slower than the year-before 18.5 percent—and in exports, which grew by by a faster 19.2 percent last year compared to 10.7 percent in 2016.

Still, this trend in international trade has resulted in a sharply higher deficit between imports and exports, with the government’s extravagant infrastructure projects incurring heavier import costs of machinery and building materials. This deficit has taken a toll on the Philippine peso’s value against other currencies, which impacts on costs of other imports of essential products such as fuel and food (mainly rice and wheat).

The service sector remains the biggest sector of domestic production, accounting for 47.9 percent of the nation’s income in 2017. Industry, although posting a higher growth rate, contributed 28.5 percent, and agriculture, hunting, forestry and fishery combined for a 7.1 percent share of the economy.

In the manufacturing sector, the three biggest groups in terms of value of production are food manufactures, chemical and chemical products, and beverage industries. But the fastest growing sectors last year were fabricated metal products and basic metal industries, possibly reflecting the government’s priority on the construction of large infrastructure projects.

At some point, it might be useful for the Duterte economic managers to consider that people cannot eat concrete roads or bridges. The agricultural sector, regarded as the linchpin of our developing economy, does not need to be neglected if the poor Filipinos are to have a taste of progress.