Gov’t Claim of High GDP: Sustained Growth?

Poor people cannot be blamed for not sharing the government’s euphoria over the 6.4 percent growth in the gross domestic product (GDP). After all, they cannot feel such growth, and a close scrutiny of the figures shows that the latest data on the local output only reflects the kind of economy the country has.

By DANILO ARAÑA ARAO
Bulatlat.com

President Gloria Macagal-Arroyo said that the first-quarter 6.4 percent growth in the country’s gross domestic product (GDP) is the strongest since 2001. Following this, her own spokesperson, Ignacio Bunye, stressed, “(This) can be attributed to the robust performance by the agricultural sector and strong domestic consumption.”

Agriculture, Fishery and Forestry indeed grew 7.7 percent. Palay and corn posted growth rates of 13.1 percent and 13.4 percent, respectively. Bunye claimed that the administration “vigorously implements the agriculture and fisheries modernization program which allocates P20 billion annually for various infrastructure projects like irrigation, farm-to-market roads and post-harvest facilities.”

On the other hand, personal consumption expenditure (PCE) posted a growth rate of 5.9 percent for the first quarter of the year. Romulo Virola, secretary-general of the National Statistical Coordination Board (NSCB), admitted that heightened consumer spending was boosted by election-related activities.

According to Virola, “(t)hese were reflected in the marked increases in the expenditures of food, beverages, clothing and footwear and transportation/communication. Increased remittances of Overseas Filipino Workers (OFWs), improved farm income, the Filipinos’ insatiable passion for text messaging and the stable prices of consumer goods and services also contributed to the vigorous growth of PCE.”

Scrutinizing growth

Noticeable in the latest national income accounts data, however, is the negligible growth rate of Manufacturing. It grew only 4.3 percent during the first quarter, the lowest among Industry subsectors. This sector’s performance is significant since a substantial growth rate theoretically reflects more employment opportunities.

Instead, Mining and Quarrying posted the highest growth rate with 21.0 percent followed by Construction (6.5 percent) and Electricity, Gas & Water (5.4 percent).

The double-digit growth rate of Mining and Quarrying is both speculative and short-term and cannot be effectively sustained without dire repercussions on the environment.

The speculative and short-term nature of growth also applies to Agriculture, Fishery and Forestry as various external factors like the weather and the El Niño can spell gloom or doom for this sector at any particular time.

Much as the administration provided funds for agriculture and fisheries modernization, the liberalization of agriculture much be taken into account since the current policy environment does not allow direct subsidies to local farmers. Under the principles of the General Agreement on Tariffs and Trade (GATT), direct subsidies constitute unfair trade practice since both local and foreign industry players must be treated equally.

Growth due to “Pasa Load”?

It is interesting to note that among the Services subsectors, Transportation, Communication and Storage, according to the NSCB, “fortified its growth to 9.3 percent in (the first quarter of) 2004, from 8.6 percent in the same period last year.”

The NSCB admitted, “Mobile telephone service providers showed substantial gains in profits with the introduction and consequently, the popularization of the low-denomination over-the-air reloading scheme. This innovative offering made mobile phone services more available and affordable to a larger base of consumers.”

In other words, the domestic economy remains cellphone-driven. The mobile telephone service providers’ effective marketing of the “pasa load (pass-a-load)” scheme helped in boosting its profits and gave prepaid subscribers a more convenient way to reload their cellular phones. Through this, a person can send a certain amount of load to someone in need.

Prior to this scheme, it may be recalled that mobile telephone service providers introduced SMS-only prepaid cards at lower prices as an alternative to prepaid cards which cost from P300 to P1,000 (or $5.37 to $17.90 based on an exchange rate of P55.88 for every US dollar).

Low remittances and taxes on cellular phones?

There was a marked reduction in net factor income from abroad (NFIA) as it grew by only 3.4 percent during the first quarter of 2004, compared to 16.7 percent during the same period last year.

OFW remittances comprise a substantial part of NFIA and these only amounted to $1.2 billion from January to February 2004, roughly the same amount in the first two months of 2003.

To raise much-needed revenues, the administration is planning to impose taxes on cellular-phone text messaging. A government official who requested anonymity was quoted as saying that “too much texting,” especially of jokes, made the activity go beyond being a necessity. “Texting” therefore may be subjected to excise tax, similar to what is imposed on items like alcohol, cigarette, luxury vehicles and jewelry.

Around 100 million text messages are sent throughout the country daily. If government were to collect even just P0.10 ($0.002) for every text message, this would already translate to government revenues of P10 million daily ($178,954.90) or P3.6 billion ($64,423,765.21) in one year.

That the administration is toying with an idea that will draw flak from various sectors already reflects its desperation to look for funds.

Services still biggest contributor

Among the three sectors, Services accounted for the biggest share of 46.0 percent to total GDP, followed by Industry (32.5 percent) and Agriculture, Fishery and Forestry (21.5 percent).

It is ironic to think that a supposedly agricultural country depends on Services for the much-needed boost for the economy, a situation that traditional economists say only happens to a country that has reached post-industrial status.

As economists get confused in analyzing the economic model that is the Philippines, the Filipino people wonder why there is so much euphoria about economic growth and continue to try to survive in these trying times. Bulatlat.com

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