The economy under Aquino: Robust, but not inclusive

by Ryan Chua, ABS-CBN News

Posted at Jul 10 2015 12:24 AM | Updated as of Jul 15 2015 03:07 AM

When driving through the bustling streets of Makati's central business district or the Bonifacio Global City in Taguig, one could easily say the economy is in good shape and taking a straight path or tuwid na daan, as the Aquino administration’s favorite catchphrase goes.

Indeed, from being the sick man of Asia, the Philippines is now the region’s rising star, outperforming other countries in the region but China in terms of economic expansion.

Yet the well-paved roads and glittering skyscrapers of the capital’s financial centers could not mask another reality: poverty and joblessness persist, and economic growth has yet to be enjoyed by many.


Government officials and analysts say the Philippine economy had some of its best years under President Aquino, who campaigned on an anti-corruption platform and won the 2010 elections with an overwhelming mandate.

From 2010 when he assumed power to 2014, the country’s economy—measured through the gross domestic product or the total value of all goods and services—grew by an average of 6.3 percent.

“That’s the highest five-year average we have had in 40 years. If we sustain that growth for this year, the six-year average growth for the country would be the highest we have had since the 1950’s,” said Secretary Arsenio Balisacan, director-general of the National Economic and Development Authority.

“We never had it this good in the Philippines, at least for the Philippine economy.”

Although growth slowed down in the first quarter of 2015, largely due to government under-spending, officials believe a recovery is in the horizon.

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The Philippines’ economic expansion has exceeded expectations both locally and internationally.

Nouriel Roubini, considered the “Dr. Doom” of economists, was so impressed he once remarked the country should already have a credit rating upgrade.

And it did. In 2013 and 2014, the Philippines earned investment grade status from major credit ratings agencies Standard and Poor’s, Moody’s, and Fitch. The upgrades give government easier access to loans to fund its programs, and make the country more attractive to investors.

With more investments, the Philippine stock exchange index also reached record highs several times and has so far maintained a bullish outlook.

Inflation is low as prices have goods have remained stable, and so is the interest rate, which means it is less costly to borrow money.


While acknowledging the foundations laid by the policies of past administrations, officials of Aquino’s government attribute economic stability largely to public and investor confidence in his leadership.

Aquino has been widely praised for his anti-corruption drive, although he also faces criticisms for sparing his friends and allies.

“No country could sustain a long growth, could achieve rapid growth and sustain that for a number of years, without the public perceiving the governance structure, the institutions to be stable, to be predictable, to be credible, to be accountable,” Secretary Balisacan says.

“You now see Filipinos investing aggressively. You read in the papers today how aggressive they are in investing in all forms of assets—in manufacturing, in tourism, in real estate, in construction. It’s amazing how things have changed.”

Even observers from the private sector agree that having a political system perceived as clean—or at least, less corrupt—has propelled economic growth and maintained stability.

“Certainly there has been a perception that there is less corruption, or at least less crony capitalism present in the decisions of the government,” says Calixto Chikiamco, a businessman and economist at the Foundation for Economic Freedom.

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The economic story changes, however, when one examines government’s own numbers.

Although the numbers are impressive and economic activity is booming, majority of Filipinos have yet to feel and reap the benefits of the much-touted progress.

“It’s important not to belittle the gains that we’ve managed to accomplish. But the problem with the growth that we’ve seen is it’s highly concentrated in a few industries and in a few firms in those industries,” says the economist Ronald Mendoza, director of the Asian Institute of Management’s Policy Center.

“So this type of growth, while impressive on paper, is not going to be sustainable in the longer run because it’s not including the bigger part of our population.”

Among the major components of the economy, the services sector, which includes transportation and communications, has consistently been the largest. It was 46.9 percent of GDP in 2014.

The industrial sector, including manufacturing and construction, was a far second with 27.7 percent in the same year.

Meanwhile, agriculture and fisheries—sectors that employ the country’s poorest workers—have remained the smallest component and have been growing the least. It was just 8.3 percent of the economy in 2014.

Sonny Africa, executive director of IBON Foundation, said the agriculture sector is supposed to be the foundation for an industrialized economy like those of the Philippines’ Asian neighbors.

Critics like him have slammed the government’s failure to implement genuine land reform and distribute land to farmers, which some economists have tied to increased productivity.

“Our starting point should be what we have. And we have an agricultural economy,” Africa says. “We can’t leapfrog to industry without nurturing what we already have.”

Beyond the major industries, household consumption remains the largest driver of the Philippine economy. The consumption comes from people spending for goods and services, with a sizeable amount of the money coming from overseas Filipino workers’ remittances.

But this is not enough to sustain growth, experts say.

“It could lead to some growth, but consumption could be coming from consuming imported goods or services only. To really have inclusive growth, we have to increase the share of industry to the growth because the higher paying jobs really come from industry,” Chikiamco says.

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Despite the economic gains, some 25 million Filipinos or a quarter of the population live in poverty. The unemployment rate, meanwhile, stands at 6.6 percent, a decrease from 7.5 percent a year earlier.

For Africa, economic growth under Aquino is “all hype.”

“When the hype is gone, when it is revealed that there are still a lot of poor people in the Philippines, that many are still jobless, that many of those who have jobs do not earn enough, it won’t take long before the emptiness of this economy is exposed,” he says.


The administration admits it still faces many challenges in running the economy. However, officials say there are already programs to let growth trickle down to society’s neediest, including the conditional cash transfer program, Aquino’s centerpiece anti-poverty measure.

Government also plans to ramp up its spending, especially for infrastructure.

“There is no such thing as a magic wand that could solve the problem overnight. Indeed there is no country in the world that has eliminated poverty, unemployment, underemployment in one administration, in three years or in six years,” Balisacan says.

“What we needed to do, and it was very clear from the very start, is that we need to address the economic problem.”

Whoever succeeds Aquino next year, and whatever policies he or she implements, the present leadership hopes it has built an economy strong enough to withstand shocks—and in the long run, inclusive enough to benefit more people.