Transcript Slide 1

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?