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From Bad to Worse
Yearend Birdtalk
Quezon City, January 12, 2006
At the start of 2005, Pres. Arroyo declared:
“The economy is on a roll!”
and…
… at the end of 2005, she declared:
“A bright tomorrow awaits us!”
Yet in all the things that matter,
the people were in a miserable
state in 2005.
Main factors
1. Externally
• high oil prices + global slowdown + weather
2. Internally
• Economy’s long-standing weaknesses
• Particular in 2005:
- GMA’s legitimacy
- continuing efforts to deal with fiscal crisis
- sticking to bad “neoliberal” market economics
The result…
WORST sustained lack of jobs
in the country’s history
In 2005 (ave.):
10.9 million Filipinos
were jobless or still
looking for more work
(4.1 M unemployed, 6.8 underemployed)
A historic
high!
WORST jobs performance of any
administration in the country’s history
Source: NEDA
INFLATION is nearing the highest
in the past decade.
Inflation Rate, 1995-2005 (% )
10
9
9.3
8.1
2005
8.4
7.7
7.7%
8
6.8
Inflation rate
7
6
6
5.9
5.6
5
4
3.5
4
3
3
2
1
0
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
Year
Source: BSP
Rates for PUBLIC UTILITIES soared.
1. OIL:
average petroleum product prices
have increased by
2. POWER:
power rates per kWh have
increased
3. WATER:
30%
12-24%
water rates per m3 have
increased
33-52%
Sources: DOE, Bayan Muna Research, IBON Databank
While WAGES weren’t enough
for decent living.
Daily cost of living, Dec 2005
(NCR, family of 6)
PhP 650.17
Daily minimum wage, June 2005
(NCR, non-agricultural)
PhP 325.00
For a gap of…
PhP 325.17
Source: DCOL, IBON Databank; Minimum Wage, NWPC
Falling spending on SOCIAL SERVICES
FALL in the real value
between 2004 and 2005
Education
Health
Housing
2.5%
17.2%
1.0%
Source: Budget data, CPBO; Inflation rates, BSP
The real “turnaround”: Slowing growth
National Income Accounts by Expenditure (at constant 1985 prices)
First to Third Quarter 2005, Growth Rates (in %)
Indicator
Gross National Product
Growth Rate
Depressed
consumer
5.42
demand
Gross Domestic Product
4.63
Type of Expenditure a
Personal Consumption Expenditure
4.84
Government Expenditure
Capital Formation
Exports
Less: Imports
a
4.95
Depressed
investments
(5.40)
Slowing
exports
1.95
- components will not add up to total GDP due to statistical discrepancy
Slowing
Source: National Statistical Coordination Board imports
3.12
The real “turnaround”: Slowing growth
National Income Accounts by Industry (at constant 1985 prices)
First to Third Quarter 2005, Growth Rates (in %)
Slowing
Growth Rate
agriculture
Indicator
Gross National Product
5.42
Gross Domestic Product
4.63
Agriculture, Fishery, Forestry
Industry
Services
Of which, slight
manufacturing
growth
Source: National Statistical Coordination Board
Slowing
services
1.11
4.59
6.07
Peso appreciation not due to any real
domestic economic development.
P56 (3Q-05)  P53.02 (start-06)
9-month BoP surplus (US$2.7 B) due to:
1. PRIMARILY due to OFW
•
remittances
As of end-Oct: US$8.8 B (27% increase)
Peso appreciation not due to any real
domestic economic development.
2. Secondarily, higher net portfolio inflows
•
•
•
Jan-Sep ‘05: US$3.2 B (452% increase)
… going to stock market
… going to government borrowing
3. Also due to FDI coming in:
•
•
FDI increased by 2,053%
(US$756 M in 1st to 3rd quarter)
Manufacturing, real estate, services
* Though “incentives” reduce benefits to almost nothing
Fiscal stability?
Deficits lower but remain:
1. 11-month natl govt (NG) budget deficit 24%
lower than target…but…
Debt payments are high and still rising:
1. Total NG debt payments are 24% higher in
2005
2. 2005 debt payments will eat up over 90% of
total revenue
The simmering fiscal crisis: NG debt service
National government debt ( foreign and domestic) payments,
1981-2006p (P billion)
Debt serv ice (interest)
Debt serv ice (principal)
700.0
Total debt pay ments
109.2
113.4
118.0
1992
1993
1994
358.0
274.4
227.8
164.5
121.5
1991
125.6
106.3
83.2
34.8
1986
1989
21.6
1985
71.2
14.6
1984
1988
8.7
1983
69.8
8.3
1982
1987
6.7
100.0
1981
200.0
1990
300.0
1997
P 125.6
billion
117.7
400.0
1996
1997
137.2
500.0
205.4
470.0
600.0
721.7
674.1
2.0
PP721.7
billion
billion
a day
542.2
800.0
2006p
2006p
2006p
2005p
2004
2003
2002
2001
2000
1999
1998
1995
0.0
Fiscal stability?
Debt stock is high and still rising:
1. Total outstanding NG debt (P4.02 trillion,
Sep-05) is still a 6% increase
2. End-June-05 outstanding public sector debt
(OPSD) is at P5.5 trillion or 108% of GDP…
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
3. Cutbacks in social services
Comparing REAL spending
in 2006 to 2001 (CPI, 2001=100):
Selected NG expenditures,
1986-2006p (P billion)
Total debt serv ice
Education
800
721.668
Health
700
674.114
Housing
Defense
600
542.2
470
P billion
Debt500
service is 101% higher
357.959
400
Education
is 5% lower
300
Health
is 19% lower
205.396
200 125.649
274.439
227.843
164.5
Defense is 11% higher
100
0
1997
1998
1999
2000
2001
2002
Year
2003
2004
2005p
2006p
The people can’t take much more
“sound economic fundamentals”.
1. Backward economics: No true agrarian reform,
national industrialization and social welfare
- pro-FDI: Cha-cha, WTO, FTAs
2. Higher prices post-EVAT
- depressed consumption
- ? drastically slower growth
3. Financial turmoil?
- illegitimacy leading to instability
- adverse global movements
Maraming salamat!
Sa IBON Databank
Sa inyong lahat
Ang mga pinagkukunan ng
bansa ng dolyar…
Palagiang
Balanse ng
kita sa EXPORTS
at NEGATIBO
gastos sa IMPORTS
Dayuhang
PAUTANG
???
Dayuhang PAMUMUHUNAN
???
Dayuhang ISPEKULASYON
???
Palagiang
Remitans ng OFW
POSITIBO