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The State of the Nation:. The Economic Perspective. Cielito F. Habito, Ph.D. Columnist, Philippine Daily Inquirer Director, Ateneo Center for Economic Research & Development. Ateneo Center for Economic. Research and Development. What’s the State of the Philippine Economy?.
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The State of the Nation: The Economic Perspective Cielito F. Habito, Ph.D. Columnist, Philippine Daily Inquirer Director, Ateneo Center for Economic Research & Development
Ateneo Center for Economic Research and Development What’s the State of the Philippine Economy? Of the three key variables that matter most to the common Filipino - prices, jobs, and incomes - all three now show qualified improvement, but the jobs situation remains weak and tentative.
Ateneo Center for Economic Research and Development First Quarter ‘07 Highlights: Strengths • Prices remained stable • Employment shows some (qualified) improvement • GDP grew at a (surprising) record 6.9 percent • Equity, currency markets on bull run
Ateneo Center for Economic Research and Development First Quarter ‘07 Highlights: Threats • Fiscal balance deteriorating • Revenues below target • Deficit exceeding target • Foreign direct investment fell in Jan-Apr 2007 • Export growth has weakened • Imports fell in real terms
…although still higher than most of our neighbors in 2006 Only Indonesia has a worse inflation record
Profile of the Unemployed • 2.7 million are unemployed under new definition; about 4 million based on old definition, i.e.+ frustrated jobseekers • 6.4 million are underemployed; mostly in agriculture • Of the unemployed: • 80% are within ages 15-35 years • 61% never went beyond high school
What pushed Q1 growth? • Production side: Services • Finance (13.4%) • Real Estate (18.6%) • Communication (10.1%) • Spending side: • Government Consumption (13.1%) • Public Construction (16.9%) • Exports (9.1%) Metro Manila
Why is it not good news for most Filipinos? • Sectors with broader and poorer base (esp agriculture) grow the least • Fastest growers are low-job sectors • Job generation has been weak and of low quality • Market trends driven more by global forces than by domestic developments • Political & economic power structures continue to bias growth, limit benefits Ateneo Center for Economic Research and Development
Where did the growth come from?Metro Manila and Surrounding Provinces 55.7% 61.2% Metro Manila
Growth for whom? • Agriculture: 36.7% of workers, but only 8.2% of the growth in Q4 ’06 • Manufacturing & Trading: 45% of GDP growth, but only 28% of workers • The 3 fastest-growing regions (NCR, VI & VII): 62% of GDP growth; only 29% of the jobs • Metro Manila and nearby provinces: 61% of growth, but only 39 percent of the jobs • Growth is still not occurring where jobs are needed most. Metro Manila
…yet total investments still fell Implication: Domestic investment fell even more sharply
Latest Bad News: Foreign direct investments fell in January-April 2007
Economic Imperatives Foremost Challenge: Spread the benefits of economic growth (more broad-based, job-creating growth)
Economic Imperatives Broad-based growth from: Agriculture & Tourism • Let LGUs row, while DA just steers • Replicate NorMin Veggies story • Foster SME agri-processing • Seize tourism opportunities: surging tourism from China, India, Korea • Ease up on our skies
Economic Imperatives • Ramp up revenue performance • Improve spending quality (more good economics, less politics in budget allocation) • Expand & diversify exports (products and destinations) • Restore domestic investor confidence!
Overarching Imperative:It’s (the) Governance, stupid! • PGMA must convince us that real change is at hand • Quality appointments (tap real talents) • Right policy decisions (greatest good for greatest number) • Shed partisanship & vindictiveness • True & sincere reconciliation, with justice • Political will (is much more than E-VAT) • PGMA can still redeem herself… but does she know how? (Or does she care?)