Financial Storm Brewing

The most recent calls by the country’s business elites for President Gloria Macapagal-Arroyo to step down only underscore her far-reaching failures as an economist. Coming on top of mounting popular unrest because of the people’s worsening condition over the last 4½ years, they herald a looming financial meltdown if Ms. Arroyo does not resign.


President Gloria-Macapagal Arroyo is clearly not only an illegitimate president but a failed economist. More than ever, the Philippine economy isn’t producing the goods and services needed by the people nor creating the productive livelihoods they need to afford these.

The people’s situation has unambiguously worsened since Ms. Arroyo assumed the presidency in 2001.

People’s plight

Unemployment has risen to unprecedented levels. The 11.4 percent average rate from 2001-2004 is the worst sustained unemployment in the country’s history. Indeed, the annual 11.8 percent unemployment rate last year is – apart from a brief spike to 12.8 percent in 1985 – the highest in the last half-century of official unemployment data. As it is, in April 2005 there were 13.2 million Filipinos either out of work or working but still looking for additional jobs because they still weren’t earning enough.

Inflation rates have been rising since 2002 and, since late-2004, are already at the highest levels in the last decade. The average monthly inflation rate in the first half of the year of over 8 percent is already nearly three times the 3 percent rate in 2002. Consumers feel this in rising transport fares and soaring prices of such basic goods as rice, pork, chicken, galunggong (round scad), cooking oil and instant noodles. Prices of oil products have increased 22 percent, of power by up to 19 percent, and of water by up to 52 percent just since the start of the year.

And even for those lucky enough to have jobs, incomes continue to fail to keep up with these rising prices. The daily cost of living for a family of six in the National Capital Region (NCR) is estimated at PhP620 in May 2005 yet the daily nominal minimum wage in the NCR is only a little over half of this at just PhP325.

The Arroyo administration meanwhile has embarked on a fiscal austerity program that lays off government workers and drastically cuts back on social services spending. In just the past year, some 126,000 public sector jobs have been lost according to the latest Labor Force Survey (LFS).

The four years of Ms. Arroyo’s watch has also seen the real value of education spending fall 3.2 percent, of health spending fall 24.5 percent and of housing spending fall 61.0 percent from the four years before her. These real budget cuts are even worse if population growth is factored in. Eroding public support not only denies people’s social services but also makes these more expensive.

All these have shown up in the economic indicators more usually reported by the government. Growth in gross domestic product (GDP) slowed to 4.6 percent in the first quarter of 2005 compared to the 6.1 percent whole-year rate in 2004. Growth has been severely depressed by dropping consumer demand (inevitable, given rising joblessness and falling real incomes), government austerity and domestic productive sectors hollowed out by two decades of increasing “globalization.”
Business’ bane

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