Aquinomics
The downward revision in this year’s second-quarter growth performance and the disappointing 3.2-percent growth in the second quarter put the Philippines’ gross domestic product growth in the first nine months of the year at 3.6 percent. This is lower than the 4.5-percent to 5.5-percent official government GDP growth target for the year. What will be the final growth figure for the whole year? The answer depends on the performance of the economy in the fourth quarter.
If the lower end of this year’s growth target will have to be reached, the economy must grow by at least 7 percent to 7.5 percent in the last quarter. This is highly improbable now, given what happened in the first nine months both domestically and globally. At most, the economy can grow only by 4 to 5 percent in the first quarter. If this happens, the full-year GDP growth will be 3.7 percent to 3.95 percent. On the other hand, if the fourth quarter growth will be 3 percent to 4 percent, then the full year GDP growth will be 3.45 percent to 3.7 percent. Either way, the result will still be lower than the target for the year.
One reason cited by many economists for the much lower than expected Philippine economic growth in the first nine months of 2011 was the failure of the national government to speed up the use of its funds. Using Department of Finance data, it can be seen that of the programmed expenditures of P1.275 trillion in the first nine months of 2011, the national government spent only P1.070 trillion, which is also lower than the P1.154 trillion spent by the national government in the first nine months of the previous year. As a result, the national government brought down its fiscal deficit to P52.994 billion in the first nine months of the year, which is also much lower than the deficit of P270.302 billion incurred during the same period last year or the programmed deficit ceiling of P234.350 billion for the first nine months of the year. A lower government deficit may look good to our leaders and lenders but not so when it is achieved with much lower growth in output, employment and income.
P-Noy’s economic team promised to do more to speed up the use of government funds in the last quarter. In addition, P-Noy announced an extra P72 billion to stimulate the economy for the rest of the year. Indeed, the National Government already registered a larger deficit in October amounting to P21.257 billion. This brought up the January to October fiscal deficit to P74.251 billion but this was still much lower than the deficit of P270.302 billion incurred during the same period last year.
According to Singapore’s DBS group, the Philippine government’s 2011 budget deficit may actually reach P145 billion. This means that the government should have incurred an additional P71 billion in deficit in the last two months of the year. This is not hard to do and this may have been actually done already considering that only few days more are left before the close of the current year. But if this is what the government could only do, would that be enough for the economy to grow by 4 percent to 5 percent in the last quarter? I am afraid not and this means that the government must double its effort to guide the economy to higher growth path next year if it has to achieve its target of bringing down our poverty incidence, which in 2009 still covered around a third of our people using the old method of measuring our food threshold or up to a fourth of our people using the new but now very controversial method.
The four pillars of what the new government now calls “Aquinomics” are: (1) Fiscal and Macroeconomic Stability, (2) Investing in People, (3) Reducing Infrastructure Gap, and (4) Improved Business Climate. It is interesting to see what had been done in these regards after one-and-a-half year of the new government under P-Noy.
In the first pillar, some good things might actually have been achieved already but they do not necessarily result to lower poverty immediately. I already mentioned that a lower government deficit may look good to our leaders and lenders but not so when it is achieved with much lower growth in output, employment and income of our people. Presently, and aided by the increasing inflow of money from our growing number of Overseas Filipino Workers, our consumption expenditures are still robust but not our exports and investments due to the slowing down of the global economy; hence, the need for more government expenditures to boost the economy. Unfortunately, the new government has failed to do this so far.
In the third pillar, there is now more money invested to uplift the living conditions of the poorest segment of our society through the 4-Ps or Conditional Cash Transfer Program, which the new government adopted from the previous government. But although the 4-Ps long-term impact is good in changing the mind-sets of the poor children who are now assured of basic education and brighter future with the program, its present effect is only palliative, which is to augment the income of the poor through the cash transfer.
As to the third pillar, we know that its flagship project, the PPP, has not yet taken off. Finally, there is some reported improvement in the way business is done in the country as shown by the increase in the ranking of Philippine global competitiveness, but we should not also forget that we still rank below most of our neighbors in Asia when it comes to the World Economic Forum’s Global Competitiveness Index or even the World Bank’s Ease in Doing Business Study.
