Furthermore, the number of poor Filipinos jumped by 3.8 million between 2003 and 2006. These were the years leading to the three-decade high of more than seven-percent growth in the GDP in 2007, which clearly shows how detached GDP growth rates are from the reality on the ground.
Economic Destruction
In terms of the macroeconomy, GDP contractions in the Philippines are not comparable with contractions in industrialized economies like that of the US. Unlike in industrial countries where the GDP accurately depicts the state of domestic production, the GDP of a pre-industrial and backward Philippines shows the extent of how it is being affected by developments in the global economy.
The domestic economy has been tied to the production of raw materials and low-value added semi-manufactures for exports, mainly to the US. At the same time, the country has also become a dumping ground for imported commodities and foreign capital. Filipino production for Filipino consumption has never materialized as local productive sectors have been destroyed.
The magnitude of such destruction could be seen from the state of our productive sectors, which has worsened through the decades. Manufacturing has stagnated, not moving in terms of its share to the GDP since the 1970s. Agriculture, on the other hand, has been practically obliterated, with its contribution to the domestic economy steadily declining in the last four decades.
What the GDP Shows
Thus, what the GDP shows is the state of an economy deeply tied to the global economy, especially that of the US. Industrial production sank by almost seven percent, its lowest in 20 years. Manufacturing, which comprised 68 percent of industrial production, declined by more than seven percent. Agricultural production further deteriorated, contracting by one percent in the first quarter.
With steeply falling demand in recession-hit markets like the US, exports fell dramatically. Total exports fell by more than 18 percent while principal merchandise exports, which include electronics, declined by almost 31 percent. Exports, which are mostly assembled from imported components, are expected to further contract in the coming months as imports in the first quarter fell by more than 19 percent. Imports on consignment basis fell by a huge 36 percent, reflecting drastically reduced demand from abroad.
Investments have also substantially decreased as foreign investors become more risk averse amid global economic uncertainties. Investments in fixed capital formation plunged by almost six percent while investments in durable equipment fell by almost 18 percent. Such huge declines in investments in fixed capital formation and durable equipment mean less economic activity in the coming months.
The GDP growth rates in the first quarter are way below from even the low-end of government’s revised projection of 1.8 to 2.8 percent expansion in the first quarter. This confirms that the impact of the global financial and economic crunch on the Philippines is much deeper than what government expected or recognized. It also exposed the hollow optimism that Malacañang officials have been peddling in the past couple of weeks.
Political Costs
For the Arroyo administration, the political costs of a string of negative GDP growths would be huge. Remember that Arroyo and her allies have aggressively hyped the country’s supposed economic growth to help dampen persistent calls to oust her unpopular government.
Amid the global recession and massive displacements, Malacañang has painted an image of a presidency on top of the economic crisis. It has repeatedly hyped the economy’s supposed resiliency due to sound government policies amid the global crunch. It was only two years ago that Arroyo declared with certainty that the Philippines was on its path toward First World status.
All these hard sell about a strong economy under the Arroyo administration would be further exposed and discredited as the global crunch and the country’s own perennial crisis deteriorate. With its reputation irreparably damaged by the 2004 electoral fraud, a long list of corruption scandals, and an atrocious human-rights record, what else can the Arroyo administration use to sell itself to the people and claim legitimacy?
It appears that this regime is running out of materials to spin. (Bulatlat.com)
