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2009: The Gathering Storm

2009: The Gathering Storm. IBON Foundation July 15, 2009. Outline. Update on global crisis Impact on the Philippines Jobs crisis “Economic Resiliency Plan” as solution? Looming fiscal crisis Obsolete “globalization”. Update on global crisis . Global prospects (2009).

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2009: The Gathering Storm

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  1. 2009: The Gathering Storm IBON Foundation July 15, 2009

  2. Outline • Update on global crisis • Impact on the Philippines • Jobs crisis • “Economic Resiliency Plan” as solution? • Looming fiscal crisis • Obsolete “globalization”

  3. Update on global crisis

  4. Global prospects (2009) • Global growth: -2.9% (WB), -1.4% (IMF) • US (-3.5%), Europe (-3.7%), Japan (-7.1%) (UN) • = 50% of Phil exports, 64% of remits, 67% of FDI • World per capita income growth: -3.7% (UN) • World trade growth: -11% (UN), -9% (WTO) • Largest trade decline since 1930s

  5. Global prospects (2009) • 190 million jobless(ILO) • Plus 50-100 million (UN) • 3.1 billion poor(WB-WDI) • Plus 105-145 million “will stay poor/become poor” (UN-DESA) • 1+ billion hungry(FAO)

  6. Long-standing crisis Finance- and speculation-driven growth, more intense “globalization”

  7. Impact on the Philippines

  8. Even before global crisis:Industrial & agricultural decay Manufacturing smaller than in 1950s Agriculture smallest ever

  9. Upon crisis:Drastic economic slowdown

  10. Upon crisis:Drastic economic slowdown • Falling first quarter 2009 (1Q-09) GDP (gross domestic product) growth • 4Q-08/1Q-09: negative 2.3%worst in 20 years • 1Q-08 to 09: 0.4%  worst for 1Q in 19 years • Falling consumption • 4Q-08/1Q-09: negative 3.1%worst in 14 years • 1Q-08 to 09: 0.8%  worst for 1Q in 23 years • Note: Despite “job creation”, increasing deployments & rising remittances (more slowly)

  11. Collapsing exports

  12. Collapsing exports • Jan-May-09 (NSO): Down 34.5% • 8 months of consecutive decline so far • * electronics (-37.5%), clothing (-23.6%) • 1Q-09 (NIA): Down 18.2% • worst for 1Q in at least 30 years • * manufacturing (-7.3%) worst for 1Q in 24 years • * Oct-08 to Apr-09: 154,966 workers displaced, of w/c 58% “flexible work arrgts” (DOLE) • 1Q-09 (BoP): Down29.6%

  13. Falling investments

  14. Falling investments • 2007-08 (BoP, net FDI): • Down 48% (to $1.5 B) • Although 29% increase in Jan-Apr 2009 (to $648 M) • 1Q-09 (NIA, capital formation): • Down 17% • Three consecutive quarters already (e.g., factories, equipment, construction…)

  15. Slowing remittances

  16. Slowing remittances • 2008: • Deployments – 1.24 million • Remittances – $16.4 billion • Jan-Apr 2007: $4.68 B (26.1% growth)Jan-Apr 2008: $5.36 B (14.5%)Jan-Apr 2009: $5.50 B (2.6%) • Fell in 10 out of Top 20 countries (= 96% of all remits): $459 M less • US (fell 10% or US$266M less), UK (fell 9%), Italy (25%), UAE (2%), Hongkong (22%), Taiwan (33%), Bahrain (10%), Kuwait (53%), South Korea (13%), Spain (10%)

  17. Jobs crisis

  18. Historic joblessness • 2001-2008: Ave. 11.2% true unemployment rate: highest in country’s history • 2008: 10.7 millionlooking for work= 4.1 million jobless + 6.6 millionunderemployed (+ 8-9 millionFilipinos abroad) • April 2009: govt reports lower unemployment, but…

  19. Poor quality of “jobs” & disguising unemployment • Apr-2009: 10.8 million looking for work= 4.2 million jobless + 6.6 millionunderemployed • Poorly earning, non-earning, insecure work • Part-time work rose 2.4 M to 14.3 M (now two-fifths of all work) … full-time work fell 925K • 1.3 million out of 1.5 million “jobs” weak: • Domestic household help – 138,000 • “Unpaid family work” – 392,000 • “Self-employed” – 788,000 • vs. 45K increase (‘07), 74K (’08), 87K (’06) • Crowding into shrinking sectors: agri, trade, trade, transpo & communication, real estate, education, health…

  20. Government’s “solution” • Do not count unemployed • change definitions (Apr-05) and don’t count ~1.4 M jobless Filipinos • “Double-count” jobs for propaganda • Report jobs from supposedly “economic stimulus” or “crisis programs” • Report jobs from “jobs fairs” • Peddle Filipinos abroad • A.O. No. 247 (Dec-08)

  21. “Economic Resiliency Plan” as solution?

  22. “Economic Resiliency Plan” (ERP) P330B = • P160 B increase in 2009 natl govt (NG) budget • Comprehensive Livelihood & Emergency Employment Program (CLEEP) – 460,000-825,000 jobs • Pantawid Pamilyang Pilipino Program (4Ps) – 700,000 HH • Self-Employment Assistance Kaunlaran (SEA-K) – 14,105 HH • Tindahan Natin – 1.2 million families • Food for School – 448,043 children • Microfinance Lending – 250,000 “end clients” • P40 B corporate/individual tax breaks • P30 B additional benefits to GSIS/SSS/PhilHealth members • P100 B off-budget infrastructure(GOCCs, GFI, private sector)

  23. ERP: Insignificant increase (1) • P160 B increase not a “stimulus” • P1.4 trillion NG budget only 16% of GDP • vs. 24% (1990) • Only 16% increase in non-debt spending (2009) vs. increases of: • 20% (1985) • 21% (2007) • 22% (1997) • 23% (1989) • 24% (1994) • 28% (1990)

  24. ERP: Insignificant increase (2) • P30 B additional benefits temporary, taken from future benefits? • to GSIS/SSS/PhilHealth members – • P100 B off-budget infrastructure uncertain, if ever 2010 onwards? • GOCCs, GFI, private sector

  25. ERP: Dishonest recycling (1) • ERP reports pre-crisis govt activities • P160 B: Already includedin NG budget (Aug-08) • Explicitly (budget & beneficiaries) • 4Ps (P5 B DSWD) • SEA-K (P39 M) • Tindahan Natin (P160 M) • Food for School (P5.1 B DSWD/DOH) • Implicitly: • Much of CLEEP “job creation” • + Performance bloat? – ex. 4Ps original target 321K over 2008-2012 • P40 B tax breaks not new • corporate (c. RVAT 2005) • individual (c. 2008)

  26. ERP: Dishonest recycling (2) • CLEEP cannot possibly be creating 460,000-825,000 new jobs – no budget, no jobs • DPWH, DOTC, DA, DepED • Implicit wage bill (460K-825K): • 6 months = P22-39 billion • 12 months = P44-79 billion • If these are all infra, implies P73-263 billion worth of projects… • … yet only P25 B additional in approved budget • P10 B “stimulus fund” + insertions

  27. Looming fiscal crisis

  28. Deficit target:P40 B(Oct-08) Out of control deficit not due to any imaginary “stimulus” P101 B(Jan-09) P177 B(Mar-09) P199 B(Apr-09) P250 B(Jun-09)

  29. On verge of renewed fiscal crisis… • Jan-May 2009 NG deficit:P123.2 billion • 7 times deficit last year (P18.8 billion) • 1Q-09 deficit: P120B = 6.9% of GDP • note: 1Q-02 deficit, P61B = 6.8% of GDP( whole year, P211B = 5.4% of GDP) • Basic causes: • Revenue losses from graft & corruption, trade & investment liberalization • Spending bloated by massive debt service & unproductive military spending

  30. (12.4)? (68.1)? (103.1) (119.4) (211.3) (297.9) Unresolved fiscal crisis

  31. … soaring debt service, social service cuts, new taxes • 2002-06 fiscal crisis resulted in: • P3.0 trillion in debt service • Regressive RVAT (Nov-05) • Falling budget shares, 2000-06: • Education – 17.1%  13.8% • Health – 2.1%  1.5% • Housing – 1.2%  0.6% • 2009-?? fiscal crisis: • “sin taxes” (P19-20 B), gasoline taxes • + “rationalization” of tax incentives (P10 B) • + “simplification” of net income tax (P6 B) • New round of cutbacks in education & health

  32. Obsolete “globalization”

  33. “Globalization” always more rhetoric than real (1) • Two-faced implementation by US, EU & Japan… • … destructive for Third World • Protection & support in most advanced capitalist countries…: • US, UK, Germany, France, Sweden, Spain, France… (ex. bailouts, subsidies, import controls) • … and others: • India, Indonesia, Vietnam, Russia, Ukraine, Argentina, Ecuador, Turkey, Mexico… (ex. tariffs, import controls)

  34. “Globalization” always more rhetoric than real • Guard against renewed “globalization” offensive due to crisis and search for profits: • “Rehabilitated” IMF-WB with expanded funds • Restarted WTO, ASEAN and other Free Trade Agreements • Relevance and urgency of economic nationalism: • Agrarian reform, national industrialization • Economic sovereignty in intl trade & investment

  35. Main messages

  36. The global crisis will be protracted • We are already feeling its adverse effects • The jobs crisis is worsening… • … govt’s “solution”: don’t count unemployed, double-count jobs & peddle Filipinos abroad • Govt exaggerates its supposed crisis measures… • … to camouflage continued implementation of destructive “globalization” policies • A renewed episode of fiscal crisis is looming… • … that promises greater debt burdens, cuts in social service & pressure for even more taxes • “Globalization” is obsolete… • … Need for renewed economic nationalism

  37. Salamat po

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