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RP On The Edge Of Recession:
Agriculture Suffered Most In Economic Slowdown

Mass lay-offs in the cities, rural farmers falling into bankruptcy, cheap imports flooding the market as exports decline, manufacturing slackening. These and more are the signs of the times that spell out a sluggish economy. Unless the main fault lines of the economy are fixed, the country could be in a real bad shape before the endyear–a recession, an independent think tank says.

By Edmundo Santuario III
www.bulatlat.com

Is the Philippines on the verge of a recession?

An independent think tank, IBON Foundation, sees this scenario emerging in the next few months owing to the current economic slowdown, low Gross Domestic Product (GDP) growth and a slackening in exports.

IBON Executive Director Rosario Bella Guzman raised this possibility during a semestral economic and political briefing late last week in Quezon City. “Quarter-on-quarter, the first quarter of 2001 GDP shrank by 12 percent compared to the fourth quarter 2000 GDP,” Guzman said. “An economy goes into recession after registering negative GDP growth for two consecutive quarters.”

Unless exports improve in the next few months, the GDP would contract again in the next quarter thus signaling the start of a recession, she said citing recent economic reports.

Technically, a recession is said to be taking place when there are two consecutive quarters of shrinking GDP. Such a contraction usually occurs toward the end of the business cycle when inventories pile up and consumer spending and business investment falter.

Clarifying her point, Guzman said that the increase in agriculture has been minimal as forestry continued its decline. Industry almost stagnated as mining and construction continued to contract while manufacturing substantially slowed down. Finance, government services and real estate remained dismal, she said.

Similarly, the country’s balance of payments suffered a $512 million deficit as of the first quarter compared to the $982 million surplus in the same period last year, the IBON executive director said. International reserves fell to $14.43 billion in May.

In recent months, exports shrank particularly in May by 11.4 percent compared to the same month last year. It was the fourth consecutive month that shipments of commodities fell, Guzman said. Export earnings in January-May dropped by 5.6 percent as major exports such as electronics and garments fell.

Slower exports means slower importation for lack of dollar capital, hence, slower consumption and production–a sluggish economy.

Overall, she said, “The economy is failing to sustain the weak recovery it achieved in 1999. The International Monetary Fund is projecting the GDP growth rate would even be lower by yearend. Meanwhile, according to the Asian Development Bank, of the five countries worst hit by the 1997 financial crash, the Philippines will be the weakest performer this year and next.”

U.S., Japan recession

The country’s economy has also been greatly affected by recession in the United States and Japan, the country’s major trading partners. “Much of the Philippine exports performance in the next years will depend on the prospects of the U.S. economy, which remain bleak as information technology experiences a full-blown recession,” Guzman stressed. The U.S. is reportedly facing a protracted rather than rapid recovery.

Rural bankruptcy

In her report, the IBON executive director said that the Philippine crisis is most severe in the provinces where the penetrating impact of globalization and liberalization has driven farmers to bankruptcy and displaced peasant families. Citing World Bank reports, she said that rural poverty has worsened mainly as a result of neo-liberal policy offensives on agriculture.

Agriculture underwent slow recovery of merely 1.58 percent in crop production in the first quarter, accounting for 52 percent of the total output.

Recent IBON studies show that five years after the World Trade Organization-General Agreement on Tariffs and Trade ratification by the Senate–of which then Sen. Gloria Macapagal-Arroyo was the chief sponsor–trade liberalization has intensified exploitative relations in agriculture and practically wiped out much of the farmers’ production, Guzman said.

The production of the Filipino farmer has been threatened not by weather conditions–as government economists are wont to rationalize–but by the flood of cheap agricultural imports in the local market and by lack of state subsidies. The country has increasingly become import-dependent for its consumption, she further said.

Citing reports by the Kilusang Magbubukid ng Pilipinas (KMP –Peasant Movement in the Philippines), Guzman said that around 400,000 rice farmers, 66,000 corn farmers, 200,000 fisherfolk and nearly 500,000 sugar workers and farmers have been displaced by importation. Government estimates around 72 percent of the country’s poor may be found in agriculture 42 percent of whom are poor. But IBON figures show 92 percent of the rural population is actually poor. www.bulatlat.com

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