Mr Sonny Africa (IBON research head)
August 30, 2007
The government hails the revised first quarter gross domesti c p roduct (GDP) growth rates, the just-released second quarter figures, and the resulting first semester results as reinforcing macroeconomic fundamentals. The reality however is that unsustainable election-related spending especially by the government is a major factor, that the growth is creating the wrong kinds of jobs, and that the country’s productive sectors continue to deteriorate.
The first semester up-tick in growth rates were most of all due to the appalling election-related spending by candidates and by the administration in support of its candidates. IBON estimates total campaign spending by candidates for all elected positions to be P30 billion to over P50 billion. But on top of this the government conspicuously increased its spending by P51.4 billion during the first semester 2007 election period compared to the first semester 2006 non-election period– bringing total election-related spending to a scandalous P101.4 billion.
The administration’ s election-related spending is clear from its expenditures in the first semester. The allotment to LGUs of P99.8 billion in the first semester of 2007 is a conspicuous P21.0 billion or 27% increase from the same period in 2006. This is in contrast to what was just a P1.0 billion or 1% increase between 2005 and 2006. Moreover, other national government spending – i.e., through the modified disbursement scheme (MDS) and miscellaneous spending – of P308.5 billion in the first semester of 2007 is a striking P56.5 billion or 22% increase from the same period in 2006. In contrast, there was just a P25.1 billion or 11% increase between 2005 and 2006.
This spending is reflected in the striking increase in the growth rate in government consumption (13.5% in the second quarter of 2007) which is four times the rate in the same period last year (3.3%). It is also the highest growth rate among all expenditure items in 2007 and is even more than double than that of personal consumption expenditure (5.9%). Even the 10% growth in fixed capital formation was in large part driven by public construction which grew a marked 39.6% from 11.8% a year ago. This conspicuous government spending is also reflected in GDP accounts by industry with noticeably large growth rates in construction (21.0% in the second quarter) and transport (9.8%).
Moreover, the star performers in the manufacturing sector are clearly election-related: publishing and printing (12.3% in first half of 2007 vs. -3.3% in first half of 2006), and paper and paper products (7.6% vs. 5.6%). Meanwhile, other industries such as tobacco, textile, furniture and fixtures slowed down.
The country’s productive sectors continue to languish. Manufacturing sector growth slowed to 3.7% in the second quarter of 2007 from 4.2% last year. Agriculture sector growth also slowed to 3.9% from 6.7% last year.
The slowdown is also reflected in how the manufacturing sector lost 105,000 jobs in April 2007 from the same period last year. The growth is also creating the wrong sorts of jobs. Some 673,000 or over half of the net increase in jobs of one million in April 2007 from the year before is in unpaid family work (524,000) and in domestic household help (147,000). These are among the country’s lowest-earning or are outright non-paying jobs.
The country’s productive sectors continue to languish. Manufacturing sector growth slowed from to 3.7% in the second quarter of 2007 from 4.2% last year. This reflects in how the manufacturing sector even lost 105,000 jobs in April 2007 from the same period last year. Agriculture sector growth also slowed to 3.9% from 6.7% last year. Taken with the 583,000 increase in agriculture jobs from last year, this slowdown implies that agricultural incomes are likely to have even fallen.
But all this is even assuming that the reported growth rates are reliable. Economic growth rates since 2003 have unfortunately been marked by unprecedented high and positive statistical discrepancies, which needs to be explored further.
The first semester up-tick in growth rates were most of all due to the appalling election-related spending by candidates and by the administration in support of its candidates. IBON estimates total campaign spending by candidates for all elected positions to be P30 billion to over P50 billion. But on top of this the government conspicuously increased its spending by P51.4 billion during the first semester 2007 election period compared to the first semester 2006 non-election period– bringing total election-related spending to a scandalous P101.4 billion.
The administration’ s election-related spending is clear from its expenditures in the first semester. The allotment to LGUs of P99.8 billion in the first semester of 2007 is a conspicuous P21.0 billion or 27% increase from the same period in 2006. This is in contrast to what was just a P1.0 billion or 1% increase between 2005 and 2006. Moreover, other national government spending – i.e., through the modified disbursement scheme (MDS) and miscellaneous spending – of P308.5 billion in the first semester of 2007 is a striking P56.5 billion or 22% increase from the same period in 2006. In contrast, there was just a P25.1 billion or 11% increase between 2005 and 2006.
This spending is reflected in the striking increase in the growth rate in government consumption (13.5% in the second quarter of 2007) which is four times the rate in the same period last year (3.3%). It is also the highest growth rate among all expenditure items in 2007 and is even more than double than that of personal consumption expenditure (5.9%). Even the 10% growth in fixed capital formation was in large part driven by public construction which grew a marked 39.6% from 11.8% a year ago. This conspicuous government spending is also reflected in GDP accounts by industry with noticeably large growth rates in construction (21.0% in the second quarter) and transport (9.8%).
Moreover, the star performers in the manufacturing sector are clearly election-related: publishing and printing (12.3% in first half of 2007 vs. -3.3% in first half of 2006), and paper and paper products (7.6% vs. 5.6%). Meanwhile, other industries such as tobacco, textile, furniture and fixtures slowed down.
The country’s productive sectors continue to languish. Manufacturing sector growth slowed to 3.7% in the second quarter of 2007 from 4.2% last year. Agriculture sector growth also slowed to 3.9% from 6.7% last year.
The slowdown is also reflected in how the manufacturing sector lost 105,000 jobs in April 2007 from the same period last year. The growth is also creating the wrong sorts of jobs. Some 673,000 or over half of the net increase in jobs of one million in April 2007 from the year before is in unpaid family work (524,000) and in domestic household help (147,000). These are among the country’s lowest-earning or are outright non-paying jobs.
The country’s productive sectors continue to languish. Manufacturing sector growth slowed from to 3.7% in the second quarter of 2007 from 4.2% last year. This reflects in how the manufacturing sector even lost 105,000 jobs in April 2007 from the same period last year. Agriculture sector growth also slowed to 3.9% from 6.7% last year. Taken with the 583,000 increase in agriculture jobs from last year, this slowdown implies that agricultural incomes are likely to have even fallen.
But all this is even assuming that the reported growth rates are reliable. Economic growth rates since 2003 have unfortunately been marked by unprecedented high and positive statistical discrepancies, which needs to be explored further.
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