from bad to worse yearend birdtalk quezon city, january 12, 2006
TRANSCRIPT
From Bad to Worse
Yearend BirdtalkQuezon City, January 12, 2006
At the start of 2005, Pres. Arroyo declared:“The economy is on a roll!”
and…
… at the end of 2005, she declared:“A bright tomorrow awaits us!”
Yet in all the things that matter, the people were in a miserable
state in 2005.
Main factors
1. Externally • high oil prices + global slowdown + weather
2. Internally • Economy’s long-standing weaknesses• Particular in 2005:
- GMA’s legitimacy - continuing efforts to deal with fiscal crisis - sticking to bad “neoliberal” market economics
The result…
In 2005 (ave.):
10.9 million Filipinos were jobless or still
looking for more work (4.1 M unemployed, 6.8 underemployed)
A historic high!
WORST sustained lack of jobs in the country’s history
Average annual unemployment, 1956-2005
(%)
11.2
7.6 8.26.8 6.3
7.5 8.06.2 6.4
7.2 7.18.0 7.8
6.77.7
5.26.3
4.94.0 3.9
7.98.8 9.4
10.4
10.4 11
.29.6 9.2
8.410
.69.9 9.3 9.5 9.5
8.6 8.710
.39.8
11.2
11.1 11.4
11.4
11.411.8
11.8
0
2
4
6
8
10
12
14
Year
%
Source: NEDA
WORST jobs performance of any administration in the country’s history
INFLATION is nearing the highestin the past decade.
Inflation Rate, 1995-2005 (%)
8.18.4
5.6
9.3
5.9
4
6.8
33.5
6
7.7
0
1
2
3
4
5
6
7
8
9
10
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Year
Infl
ati
on
rate
Source: BSP
2005
7.7%
1. OIL: average petroleum product prices
have increased by 30%
2. POWER: power rates per kWh have
increased 12-24%
3. WATER: water rates per m3 have
increased 33-52%
Rates for PUBLIC UTILITIES soared.
Sources: DOE, Bayan Muna Research, IBON Databank
While WAGES weren’t enough for decent living.
Daily cost of living, Dec 2005 (NCR, family of 6) PhP 650.17
For a gap of… PhP 325.17
Daily minimum wage, June 2005 (NCR, non-agricultural) PhP 325.00
Source: DCOL, IBON Databank; Minimum Wage, NWPC
Falling spending on SOCIAL SERVICES
FALL in the real valuebetween 2004 and 2005
Education 2.5%
Health 17.2%
Housing 1.0%
Source: Budget data, CPBO; Inflation rates, BSP
The real “turnaround”: Slowing growth
Indicator Growth Rate
Gross National Product 5.42
Gross Domestic Product 4.63
Type of Expenditure a
Personal Consumption Expenditure 4.84
Government Expenditure 4.95
Capital Formation (5.40)
Exports 3.12
Less: Imports 1.95
National Income Accounts by Expenditure (at constant 1985 prices)
First to Third Quarter 2005, Growth Rates (in % )
a - components will not add up to total GDP due to statistical discrepancy
Source: National Statistical Coordination Board
Depressed consumer demand
Depressed investments
Slowing exports
Slowing imports
Indicator Growth Rate
Gross National Product 5.42
Gross Domestic Product 4.63
Agriculture, Fishery, Forestry 1.11
Industry 4.59
Services 6.07
Source: National Statistical Coordination Board
National Income Accounts by Industry (at constant 1985 prices)
First to Third Quarter 2005, Growth Rates (in % )
The real “turnaround”: Slowing growth
Slowing agriculture
Of which, slight manufacturing
growth
Slowing services
Peso appreciation not due to any real domestic economic development.
P56 (3Q-05) P53.02 (start-06)
9-month BoP surplus (US$2.7 B) due to:
1. PRIMARILY due to OFW remittances• As of end-Oct: US$8.8 B (27% increase)
2. Secondarily, higher net portfolio inflows • Jan-Sep ‘05: US$3.2 B (452% increase) • … going to stock market• … going to government borrowing
3. Also due to FDI coming in:• FDI increased by 2,053%
(US$756 M in 1st to 3rd quarter)• Manufacturing, real estate, services
* Though “incentives” reduce benefits to almost nothing
Peso appreciation not due to any real domestic economic development.
Fiscal stability?
Deficits lower but remain:1. 11-month natl govt (NG) budget deficit 24%
lower than target…but…
Debt payments are high and still rising:1. Total NG debt payments are 24% higher in
20052. 2005 debt payments will eat up over 90% of
total revenue
National government debt ( foreign and domestic) payments, 1981-2006p (P billion)
6.7
8.3
8.7
14.6
21.6
34.8 69
.8
71.2
83.2 10
6.3
121.
5
109.
2
113.
4
118.
0
137.
2
117.
7
125.
6
164.
5
205.
4
227.
8 274.
4 358.
0
470.
0 542.
2
674.
1 721.
7
0.0
100.0
200.0
300.0
400.0
500.0
600.0
700.0
800.0
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
p
2006
p
Debt serv ice (interest)
Debt serv ice (principal)
Total debt pay ments
The simmering fiscal crisis: NG debt service
2006p P 721.7 billion
1997 P 125.6 billion
2006p P 2.0
billion a day
Fiscal stability?
Debt stock is high and still rising:1. Total outstanding NG debt (P4.02 trillion,
Sep-05) is still a 6% increase2. End-June-05 outstanding public sector debt
(OPSD) is at P5.5 trillion or 108% of GDP…
Fiscal stability: At what cost?
Burden is on the people:
1. Higher taxes, fees, rates and charges• 2005: “Sin taxes” (P15 B), petroleum tariffs
(P29 B), govt fees/charges (P17 B), power rates (P112 B)
• 2006: Increased VAT (P97-105 B)
2. Government lay-offs
3. Cutbacks in social services
Selected NG expenditures, 1986-2006p (P billion)
125.649164.5
205.396 227.843274.439
357.959
470
542.2
674.114721.668
0
100
200
300
400
500
600
700
800
1997 1998 1999 2000 2001 2002 2003 2004 2005p 2006p
Year
P bi
llion
Total debt serv ice
Education
Health
Housing
Defense
Comparing REAL spending in 2006 to 2001 (CPI, 2001=100):
Debt service is 101% higher
Education is 5% lower
Health is 19% lower
Defense is 11% higher
The people can’t take much more “sound economic fundamentals”.
1. Backward economics: No true agrarian reform, national industrialization and social welfare
- pro-FDI: Cha-cha, WTO, FTAs
2. Higher prices post-EVAT- depressed consumption- ? drastically slower growth
3. Financial turmoil?- illegitimacy leading to instability- adverse global movements
Maraming salamat!
Sa IBON DatabankSa inyong lahat
Ang mga pinagkukunan ng bansa ng dolyar…
Balanse ng kita sa EXPORTSat gastos sa IMPORTS
Dayuhang PAUTANG
Dayuhang PAMUMUHUNAN
Dayuhang ISPEKULASYON
Remitans ng OFWPalagiang
NEGATIBONEGATIBOPalagiang
POSITIBOPOSITIBO
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