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From Bad to Worse

From Bad to Worse. Yearend Birdtalk Quezon 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! ”.

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From Bad to Worse

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  1. From Bad to Worse Yearend BirdtalkQuezon City, January 12, 2006

  2. At the start of 2005, Pres. Arroyo declared:“The economy is on a roll!” and…

  3. … at the end of 2005, she declared:“A bright tomorrow awaits us!”

  4. Yet in all the things that matter, the people were in a miserable state in 2005.

  5. Main factors • Externally • high oil prices + global slowdown + weather • 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…

  6. A historic high! WORST sustainedlack of jobs in the country’s history In 2005 (ave.):10.9 million Filipinoswere jobless or still looking for more work(4.1 M unemployed, 6.8 underemployed)

  7. WORST jobs performance of any administration in the country’s history Source: NEDA

  8. INFLATION is nearing the highestin the past decade. 20057.7% Source: BSP

  9. Rates for PUBLIC UTILITIES soared. • OIL: average petroleum product prices have increased by 30% • POWER: power rates per kWh have increased 12-24% • WATER: water rates per m3 have increased 33-52% Sources: DOE, Bayan Muna Research, IBON Databank

  10. Daily cost of living, Dec 2005 (NCR, family of 6) PhP 650.17 Daily minimum wage, June 2005 (NCR, non-agricultural) PhP 325.00 While WAGESweren’t enough for decent living. PhP 325.17 For agapof… Source: DCOL, IBON Databank; Minimum Wage, NWPC

  11. Falling spending on SOCIAL SERVICES Source: Budget data, CPBO; Inflation rates, BSP

  12. The real “turnaround”: Slowing growth Depressed consumer demand Depressed investments Slowing exports Slowing imports

  13. The real “turnaround”: Slowing growth Slowing agriculture Of which, slight manufacturing growth Slowing services

  14. Peso appreciationnot due to any real domestic economic development. • P56 (3Q-05)  P53.02 (start-06) • 9-month BoP surplus (US$2.7 B) due to: • PRIMARILY due to OFW remittances • As of end-Oct: US$8.8 B (27% increase)

  15. Peso appreciationnot due to any real domestic economic development. • Secondarily, higher net portfolio inflows • Jan-Sep ‘05: US$3.2 B (452% increase) • … going to stock market • … going to government borrowing • 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

  16. Fiscal stability? • Deficits lower but remain: • 11-month natl govt (NG) budget deficit 24% lower than target…but… • Debt payments are high and still rising: • Total NG debt payments are 24% higher in 2005 • 2005 debt payments will eat up over 90% of total revenue

  17. The simmering fiscal crisis: NG debt service 2006pP 2.0 billion a day 2006pP 721.7 billion 1997P 125.6 billion

  18. Fiscal stability? • Debt stock is high and still rising: • Total outstanding NG debt (P4.02 trillion, Sep-05) is still a 6% increase • End-June-05 outstanding public sector debt (OPSD) is at P5.5 trillion or 108% of GDP…

  19. Fiscal stability: At what cost? • Burden is on the people: • 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) • Government lay-offs • Cutbacks in social services

  20. 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

  21. The people can’t take much more “sound economic fundamentals”. • Backward economics: No true agrarian reform, national industrialization and social welfare • - pro-FDI: Cha-cha, WTO, FTAs • Higher prices post-EVAT • - depressed consumption • - ? drastically slower growth • Financial turmoil? • - illegitimacy leading to instability • - adverse global movements

  22. Maraming salamat! Sa IBON Databank Sa inyong lahat

  23. Ang mga pinagkukunan ng bansa ng dolyar… Balanse ng kita sa EXPORTSat gastos sa IMPORTS Palagiang NEGATIBO Remitans ng OFW Palagiang POSITIBO Dayuhang PAUTANG ??? Dayuhang PAMUMUHUNAN ??? Dayuhang ISPEKULASYON ???

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