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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 2006 July 14, 2006. Broad-based economic growth Robust exports Vibrant consumption Strong business confidence Revenue surplus Better debt management Lower unemployment rate Higher wages

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The Survival of the Arroyo Regime: Why Growth Hype Won’t Do the Trick

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  1. The Survival of the Arroyo Regime:Why Growth Hype Won’t Do the Trick IBON Birdtalk Midyear 2006July 14, 2006

  2. 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 crisis?

  3. 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

  4. 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.

  5. 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.

  6. 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.

  7. 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) 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 Behind the growth in agriculture...

  8. 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 Behind the growth in industry...

  9. Between 1995 & 2000: average 4 firms daily

  10. Between 2001 & 2005: average 8 firms daily

  11. 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 And behind the growth in services...

  12. Spending is up, exports grew by more than 12%!

  13. 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

  14. “Economic pump priming”? Or Cha-cha?

  15. 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%

  16. Far from industriali- • zing as capital • formation continues • to fall

  17. Deficit -147.1 -210.8 -200.4 -184.6 -180 At least the budget deficit is falling. Artificial increase in revenues by P21B

  18. Fiscal Stability: At what cost? • Burden is on the people: • 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) • 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 • Cutbacks in social services

  19. 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

  20. 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

  21. 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

  22. Employment indicators in the Philippines (In thousands) Indicator April 2005 April 2006 Diff. Total employment 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 By type of worker Unpaid family worker 3,624 3,922 298 Own-account worker 12,301 12,440 139 Wage & salary worker 16,296 16,661 365 Source: NSO But I have created jobs!

  23. Employment indicators in the Philippines (In thousands) Indicator April 2005 April 2006 Diff. Total employment 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 By type of worker Unpaid family worker 3,624 3,922 298 Own-account worker 12,301 12,440 139 Wage & salary worker 16,296 16,661 365 Source: NSO Employment grew by 803,000 between April 2005 and April 2006

  24. Employment indicators in the Philippines (In thousands) Indicator April 2005 April 2006 Diff. Total employment 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 By type of worker Unpaid family worker 3,624 3,922 298 Own-account worker 12,301 12,440 139 Wage & salary worker 16,296 16,661 365 Source: NSO No new jobs generated in the industry sector

  25. Employment indicators in the Philippines (In thousands) Indicator April 2005 April 2006 Diff. Total employment 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 By type of worker Unpaid family worker 3,624 3,922 298 Own-account worker 12,301 12,440 139 Wage & salary worker 16,296 16,661 365 Source: NSO 365,000 additional jobs for wage & salary workers: driven by demand of BPO, call centers

  26. Employment indicators in the Philippines (In thousands) Indicator April 2005 April 2006 Diff. Total employment 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 By type of worker Unpaid family worker 3,624 3,922 298 Own-account worker 12,301 12,440 139 Wage & salary worker 16,296 16,661 365 Source: NSO While unpaid family work & self- employment continue to account for a significant portion of jobs created: 437,000 or 54% of total

  27. 2006 11.3 M No. of jobless & underemployed grew by: 1996-2001: 66,666 per year 2001-2006: 433,333 per year 2001 8.7 M 1996 8.3 M

  28. The truth is, there is aserious 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

  29. P675.54 Between 1999 and 2006… P457.86 P375.54 P247.11 P300.00 P210.75 No increase in minimum wage!

  30. The price of diesel is now 9X its price while that of gasoline is now 7X its price before deregulation.

  31. The price of diesel & gasoline is now 3X their price since Arroyo became president.

  32. 32.05 Since MWSS privatization (1997-2006): Maynilad rates grew by 344% Manila Water rates grew by 391% 19.72 7.21 4.02

  33. 32.05 Since Arroyo became president (2001-06): Maynilad rates grew by 249% Manila Water rates grew by 313% 19.72 9.18 4.77

  34. 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

  35. Why growth hype won’t save Arroyo?

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