The 2nd quarter and 1st semester results affirm why the country cannot and should not rely on external sources of growth amid the still unfolding global crisis
The 7.9% growth in gross domestic product (GDP) is welcome at least for appearing to be mainly driven by domestic investors, according to research group IBON. Net foreign capital inflows in the first five months of 2010 were earlier reported to be 68% lower than in the same period last year.
However the group said that overall, the growth remains disappointing because it is still not creating enough jobs. Despite 7.9% reported growth in both the 2nd quarter and 1st semester as a whole, there was only a tepid 1.2% growth in employment in April 2010 from the year before. Job creation is unable to even keep pace with the growth of the labor force (about 2%) or of the working age population (2.5%), and unemployment has continued to rise to a record 4.67 million Filipinos with an unemployment rate of 11.6 percent.
The 3% contraction of agriculture in the second quarter was accompanied by a massive 802,000 jobs lost in the sector in April. Philippine unemployment, whether according to the old (11.6%) or new definition (8.0%), is the worst in Asia with for instance comparative rates of only 1.5-7.7% in Thailand, Vietnam, Indonesia, Malaysia, Brunei, Singapore, Taiwan and South Korea.
Manufacturing was the most important source of growth and of jobs (221,000) in the first half of the year but this can only be sustained if demand fundamentally comes from domestic sources. Unfortunately there are signs that the spurt in electronics exports will not be sustained as the United States (US), Europe, Japan and others cut back on their stimulus programs and as even China slows down – constituting some two-thirds of the world economy.
Indeed the 2nd quarter and 1st semester results affirm why the country cannot and should not rely on external sources of growth amid the still unfolding global crisis. Earnings of overseas Filipinos and from business process outsourcing (BPO) service exports both continued to slow. Net factor income from abroad, mostly consisting of overseas Filipino incomes, is markedly slowing and only grew 7.7% in the 2nd quarter compared to 30.4% growth in the same period last year. Business services growth, which includes BPOs, in turn slowed to 10.2% from 13.8% last year.
The administration is challenged to build domestic economic momentum but the 2011 budget submitted to Congress unfortunately even drastically cuts spending on economic services which falls to PhP361.1 billion in 2001 from PhP398.9 billion this year. These services include vital power, water, communications, roads and other transport infrastructure that need to be under firm government control and regulation to prevent profiteering by private monopolies.
Rapid asset- and wealth-distributing agrarian reform is also vital to reduce rural poverty and expand incomes in a sector that accounts for a third of total employment (32.5% in April). The administration however seems more inclined to continue with the protracted Comprehensive Agrarian Reform Program (CARP) through its second extension CARPer that for two decades now has failed to genuinely distribute land and rural wealth. (end)