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The Survival of the Arroyo Regime: Why Growth Hype Won’t Do the Trick IBON Birdtalk Midyear 2006 July 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 • 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 What growth? GNP & GDP 1st Quarter Growth Rates, At Constant 1985 Prices Indicator 2004 2005 2006 GNP 7.4% 4.9% 5.8% GDP 6.5% 4.2% 5.5% Agriculture, Fishery, & Forestry 8.1% -0.5% 3.8% Industry 4.5% 3.4% 5.5% Services 7.2% 7.0% 6.2% Source: National Statistical Coordination Board We have strong macro-economic fundamentals. GNP & GDP 1st Quarter Growth Rates, At Constant 1985 Prices Indicator 2004 2005 2006 GNP 7.4% 4.9% 5.8% GDP 6.5% 4.2% 5.5% Agriculture, Fishery, & Forestry 8.1% -0.5% 3.8% Industry 4.5% 3.4% 5.5% Services 7.2% 7.0% 6.2% Source: National Statistical Coordination Board The GNP & GDP are growing at a faster rate. GNP & GDP 1st Quarter Growth Rates, At Constant 1985 Prices Indicator 2004 2005 2006 GNP 7.4% 4.9% 5.8% GDP 6.5% 4.2% 5.5% Agriculture, Fishery, & Forestry 8.1% -0.5% 3.8% Industry 4.5% 3.4% 5.5% Services 7.2% 7.0% 6.2% Source: National Statistical Coordination Board … and we had a broad-based economic growth. Behind the growth in agriculture... GNP & GDP 1st Quarter Growth Rates, At Constant 1985 Prices Indicator 2004 2005 2006 GNP 7.4% 4.9% 5.8% GDP 6.5% 4.2% 5.5% Agriculture, Fishery, & Forestry 8.1% -0.5% 3.8% Industry 4.5% 3.4% 5.5% Services 7.2% 7.0% 6.2% Source: National Statistical Coordination Board • 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 industry... GNP & GDP 1st Quarter Growth Rates, At Constant 1985 Prices Indicator 2004 2005 2006 GNP 7.4% 4.9% 5.8% GDP 6.5% 4.2% 5.5% Agriculture, Fishery, & Forestry 8.1% -0.5% 3.8% Industry 4.5% 3.4% 5.5% Services 7.2% 7.0% 6.2% Source: National Statistical Coordination Board • 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 Firms resorting to closure or retrenchment daily Between 1995 & 2000: average 4 firms daily 9 9 8 8 7 6 6 6 2 1995 2 2 1996 1997 1998 1999 2000 2001 2002 2003 b - Jan to Jun only Source of basic data: BLES 2004 2005 b Firms resorting to closure or retrenchment daily Between 2001 & 2005: average 8 firms daily 9 9 8 8 7 6 6 6 2 1995 2 2 1996 1997 1998 1999 2000 2001 2002 2003 b - Jan to Jun only Source of basic data: BLES 2004 2005 b And behind the growth in services... GNP & GDP 1st Quarter Growth Rates, At Constant 1985 Prices Indicator 2004 2005 2006 GNP 7.4% 4.9% 5.8% GDP 6.5% 4.2% 5.5% Agriculture, Fishery, & Forestry 8.1% -0.5% 3.8% Industry 4.5% 3.4% 5.5% Services 7.2% 7.0% 6.2% Source: National Statistical Coordination Board • 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 GNP & GDP 1st Quarter Growth Rates, By Expenditure, 2004-2006 2004- 2005Indicator 05 06 GNP 4.91% 5.79% GDP 4.23% 5.52% Personal Consumption 4.95% 5.07% Expenditure Government Expenditure 2.19% 9.39% Capital Formation -8.88% -2.68% Exports 1.36% 12.22% Less: Imports -2.18% 0.62% Source: NSCB Spending is up, exports grew by more than 12%! GNP & GDP 1st Quarter Growth Rates, By Expenditure, 2004-2006 2004- 2005Indicator 05 06 GNP 4.91% 5.79% GDP 4.23% 5.52% Personal Consumption 4.95% 5.07% Expenditure Government Expenditure 2.19% 9.39% Capital Formation -8.88% -2.68% Exports 1.36% 12.22% Less: Imports -2.18% 0.62% Source: NSCB Amid stagnant wages & incomes, OPH & VAT, this could only be spurred by OFW remittances: $10 B (annual ave.); $3.7 B (as of April); 8% of GNP GNP & GDP 1st Quarter Growth Rates, By Expenditure, 2004-2006 2004- 2005Indicator 05 06 GNP 4.91% 5.79% GDP 4.23% 5.52% Personal Consumption 4.95% 5.07% Expenditure Government Expenditure 2.19% 9.39% Capital Formation -8.88% -2.68% Exports 1.36% 12.22% Less: Imports -2.18% 0.62% Source: NSCB “Economic pump priming”? Or Cha-cha? GNP & GDP 1st Quarter Growth Rates, By Expenditure, 2004-2006 2004- 2005Indicator 05 06 GNP 4.91% 5.79% GDP 4.23% 5.52% Personal Consumption 4.95% 5.07% Expenditure Government Expenditure 2.19% 9.39% Capital Formation -8.88% -2.68% Exports 1.36% 12.22% Less: Imports -2.18% 0.62% Source: NSCB Industrialization? Neocolonial trade: • export-oriented but import-dependent • mere assembly hub • manufactured exports comprised 90% of total exports but semiprocessed raw mat’ls & intermediate goods comprised 39% GNP & GDP 1st Quarter Growth Rates, By Expenditure, 2004-2006 2004- 2005Indicator 05 06 GNP 4.91% 5.79% GDP 4.23% 5.52% Personal Consumption 4.95% 5.07% Expenditure Government Expenditure 2.19% 9.39% Capital Formation -8.88% -2.68% Exports 1.36% 12.22% Less: Imports -2.18% 0.62% Source: NSCB Far from industrializing as capital formation continues to fall NG Fiscal Position, 2001-2005 1000 963.2 900 800 700 710.8 777.9 826.5 884.4 783.2 699.8 600 563.7 567.1 P Billion At least the budget deficit is falling. 626.1 500 Revenues Expenditures 400 300 200 100 0 2001 2002 2003 2004 2005 Source: Department of Finance Deficit -147.1 -210.8 -200.4 -184.6 -180 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 Declining REAL spending for social services 2001-2006 (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 Employment indicators in the Philippines (In thousands) April 2005 April 2006 Diff. 31,221 33,024 803 Agri, fishery, forestry 10,993 11,420 427 Services 15,991 16,369 378 Industry 5,236 5,236 0 Unpaid family worker 3,624 3,922 298 Own-account worker 12,301 12,440 139 Wage & salary worker 16,296 16,661 365 Indicator Total employment By sector By type of worker Source: NSO But I have created jobs! Employment indicators in the Philippines (In thousands) April 2005 April 2006 Diff. 31,221 33,024 803 Agri, fishery, forestry 10,993 11,420 427 Services 15,991 16,369 378 Industry 5,236 5,236 0 Unpaid family worker 3,624 3,922 298 Own-account worker 12,301 12,440 139 Wage & salary worker 16,296 16,661 365 Indicator Total employment By sector By type of worker Source: NSO Employment grew by 803,000 between April 2005 and April 2006 Employment indicators in the Philippines (In thousands) April 2005 April 2006 Diff. 31,221 33,024 803 Agri, fishery, forestry 10,993 11,420 427 Services 15,991 16,369 378 Industry 5,236 5,236 0 Unpaid family worker 3,624 3,922 298 Own-account worker 12,301 12,440 139 Wage & salary worker 16,296 16,661 365 Indicator Total employment By sector By type of worker Source: NSO No new jobs generated in the industry sector Employment indicators in the Philippines (In thousands) Indicator Total employment April 2005 April 2006 Diff. 31,221 33,024 803 By sector Agri, fishery, forestry 10,993 11,420 427 Services 15,991 16,369 378 Industry 5,236 5,236 0 Unpaid family worker 3,624 3,922 298 Own-account worker 12,301 12,440 139 Wage & salary worker 16,296 16,661 365 By type of worker Source: NSO 365,000 additional jobs for wage & salary workers: driven by demand of BPO, call centers Employment indicators in the Philippines (In thousands) April 2005 April 2006 Diff. 31,221 33,024 803 Agri, fishery, forestry 10,993 11,420 427 Services 15,991 16,369 378 Industry 5,236 5,236 0 Unpaid family worker 3,624 3,922 298 Own-account worker 12,301 12,440 139 Wage & salary worker 16,296 16,661 365 Indicator Total employment By sector By type of worker Source: NSO While unpaid family work & selfemployment continue to account for a significant portion of jobs created: 437,000 or 54% of total Number of Unemployed & Underemployed Workers, 1996-2006 (Annual Average) 2006 11,500 No. of jobless & underemployed grew by: 11,000 11.3 M 1996-2001: 66,666 per year In '000 10,500 2001-2006: 433,333 per year 10,000 9,500 9,000 8,500 2001 8.7 M 1996 8.3 M 8,000 19 9 6 19 9 7 19 9 8 19 9 9 2000 2001 2002 2003 2004 Source: National Statistics Office 2005 2006 The truth is, there is a serious lack of jobs & Arroyo has no effective program to address it 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 Cost of living versus minimum wage in NCR DCOL Ave. min. wage P675.54 Between 1999 and 2006… P per day Gap P457.86 P375.54 P247.11 P210.75 1999 P300.00 No increase in minimum wage! 2000 2001 2002 2003 2004 Source of basic data: NWPC, BSP 2005 2006 Comparative Pump Price of Gasoline & Diesel Before & Under Deregulation The price of diesel is now 9X its price while that of gasoline is now 7X its price before deregulation. 45 40 35 30 25 P per Liter 20 15 10 5 0 42.74 36.24 5.993.98 9.50 7.03 Before Start of Present Price Deregulation Deregulation Source of Basic Data: DOE Gasoline Diesel Pump Price of Gasoline & Diesel At the Start of Arroyo's Term & At Present The price of diesel & gasoline is now 3X their price since Arroyo became president. 45 40 35 30 25 P per Liter 20 15 10 5 0 42.74 36.24 16.56 13.82 Start of Arroyo's term Gasoline Diesel Present Price Source of Basic Data: DOE Water Rates in Metro Manila, 1997-2006 35 30 32.05 Since MWSS privatization (1997-2006): Maynilad rates grew by 344% Manila Water rates grew by 391% 25 P per cubic meter 19.72 20 15 10 7.21 5 4.02 M aynilad 0 M anila Water 1997 1998 1999 2000 2001 2002 2003 2004 2005 Source: MWSS Regulatory Office 2006 Water Rates in Metro Manila, 1997-2006 35 30 32.05 Since Arroyo became president (2001-06): Maynilad rates grew by 249% Manila Water rates grew by 313% 25 P per cubic meter 19.72 20 15 9.18 10 5 4.77 M aynilad 0 M anila Water 1997 1998 1999 2000 2001 2002 2003 2004 2005 Source: MWSS Regulatory Office 2006 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 Why growth hype won’t save Arroyo?