Gov’t growth hype hides worsening situation of ordinary Filipinos — IBON

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Millions of Filipinos are struggling to make ends meet due to a combination of factors, including a weak economy, low wages, and rising poverty. (Photo from IBON Foundation)

November 23, 2022

by IBON Foundation

Research group IBON said that the finance secretary’s recent trumpeting of rapid growth is hype, and stressed that the economy and the conditions of ordinary Filipinos have barely even returned to pre-pandemic levels. The group said that the economic managers are glossing over the socioeconomic crisis to project the country as business-friendly. By doing so, it is ignoring how millions of Filipinos are struggling to cope amid the poor jobs situation, low incomes, and worsening poverty, which are further compounded by high prices and lack of government support and assistance.

At an event organized by the Italian Chamber of Commerce in the Philippines (ICCPI), Department of Finance Secretary Benjamin Diokno encouraged the Italian business community to take advantage of growth and expansion opportunities in the country. Diokno assured that the Philippines would be able to achieve its 6.5%-7.5% growth target for the year. He cited the country’s 7.7% gross domestic product (GDP) growth in the third quarter of 2022 which he said was mainly due to “strong domestic demand and improvement in labor market conditions”.

IBON executive director Sonny Africa said however that the claimed strong economic growth should not be taken at face value. A closer look shows that recent growth is actually a rebound rather than real recovery and most likely driven by increased spending from upper middle- and high-income groups.

He explained that, first, the so-called strong growth in the third quarter is just the rebound from the economy reopening after the government’s imposition of among the longest and harshest lockdowns in the world. He pointed out that growth is only rapid growth because of the base effect where the Philippine economy’s growth is measured from a very low point.

In 2020, lockdowns caused a 9.6% contraction in GDP. This was the biggest economic contraction in the country’s recorded national accounts history and also the worst in South, East and Southeast Asia (aside from the small tourism-dependent economy of the Maldives). The economy contracted for five consecutive quarters and growth since the middle of 2021 is merely from the economy reopening.

The executive director further noted that even with supposed rapid growth, the level of the economy in the third quarter of 2022 (Php4.76 trillion) is nearly just the same as in the third quarter of 2019 (Php4.68 trillion) before the pandemic. This is actually even smaller than in the fourth quarter of 2019 (Php5.26 trillion) which was the last quarter before lockdowns started in the first quarter of 2020. These values are measured in constant prices to remove the effects of inflation and make the figures comparable.

Second, growth in third quarter 2022 was mainly driven by the “strong domestic demand” of what is most likely upper middle- and high- income groups and not poor Filipinos. Household final consumption expenditures grew by 8% during this quarter. Yet the fastest growing items under this were recreation and culture (by a huge 46%), restaurants and hotels (38.2%), and transportation (20.5%).

Meanwhile, growth has been limited in essentials such as food and non-alcoholic beverages (by just 3.9%); housing, water, electricity, gas and other fuels (1.3%); and education (5.4%). The growth in health (6.9%) is also possibly due to renewed healthcare utilization by higher income groups especially for foregone care during the pandemic.

Africa said that the fast growth in non-essential items is probably due to “revenge travel”, dining out and other spending by richer families taking advantage of the fewer restrictions and opening up of tourist spots. Ordinary Filipinos on the other hand especially the poor can ill-afford to use precious income on anything but necessities amid increasingly high prices for goods and services.

He also countered Diokno’s claim that solid growth was also driven by “improvement in labor market conditions” as using indicators that are not reflective of the true conditions of ordinary Filipinos. He said that job creation has actually been slowing and since the pandemic and lockdowns, has been mostly comprised of part-time jobs, self-employment and informal work.

This explains why family incomes have fallen despite the supposed low unemployment rate and high employment rate. Based on Bangko Sentral ng Pilipinas data, IBON estimates that there are 19.4 million households without savings as of third quarter 2022. This is consistent with how the Social Weather Stations (SWS) also reported some 21.3 million Filipinos consider themselves poor (12.6 million) or borderline poor (8.7 million) in the same period.

IBON stressed that rather than basing the country’s recovery progress on growth figures, the Marcos Jr administration needs to prioritize the actual situation of the country’s citizens and come up with real solutions to boost the economy and address the worsening jobs crisis and poverty. Immediate steps towards these are providing substantial ayuda to the poorest households, implementing wage hikes, lowering prices such as by removing value-added and excise taxes on oil, and ensuring support and subsidies for small business and producers.