Measly economic growth not even sustainable

Let us make one thing clear: GNP growth in the range of four percent may be high by usual Philippine standards or compared to some regional economies. But that’s grossly inadequate to make a difference in dealing with poverty. Something in the range of seven to eight percent over a number of years is more like it.

Now, a Bangko Sentral economist has also said what we suspected all along. That measly economic growth this administration is so proud of is not even sustainable. Diwa Guinigundo, managing director of the BSP’s Department of Economic Research has warned that consumer spending, which largely fueled the 4.5-percent economic growth last year, could also slow down if this remains unsupported by real economic activities.

That should be obvious but politicians, even if they have PhDs in economics, tend to play with the numbers to make us believe that our economy is doing better than we all know from first-hand experience. Well, unlike in the United States where people tend to max out their credit cards, Guinigundo said that in the Philippines, consumer spending depended more on income, rather than borrowing.

This means that Filipinos spend if they have disposable income. If they don’t, most Pinoys (specially in the countryside) wouldn’t resort to borrowing in order to finance their more conspicuous consumption needs – they would just spend less. I guess the only credit facility Pinoys take advantage of are of the micro variety with the local sari sari store for basic necessities. Or from the usurers who victimize teachers. Raul Roco tried to get rid of them while he was DepEd chief but I am told they are now back.

But growth may still continue even if Pinoys don’t borrow from banks or banks continue to hesitate to lend for so long as there is still something strong enough to drive demand in our consumption driven economy. If, for example, agricultural performance benefits from favorable planting conditions (not likely with the early dry spell this year) and remains sufficiently strong to boost households’ disposable income, consumption may go up. But the problem with this, according to the BSP economist, is sustainability.

Ideally, consumption of domestic goods and services should spur an increase in domestic production. However, since the Philippine market is flooded with imported goods, including basic commodities, consumption would not automatically translate into an increase in domestic production of consumer goods and services, Guinigundo said.

In other words, increase in consumption that reflects in a higher GDP growth may not exactly mean Pinoys are enjoying better economic prospects. This why the only kind of economic growth we can be proud of and one that is also sustainable, is one that is driven by investments. This is the kind that generates actual economic activity that creates domestic jobs.

In the first nine months of 2003, the BSP said consumption growth was at five percent, accounting for an extremely large 78.3 percent of gross domestic product (GDP) compared to 7.8 percent for government spending and 22.9 percent for investments. Can we sustain that high level of consumption even as the country’s attractiveness to investors (local and foreign) continues to dwindle dangerously?

In any case, the BSP also noted that even remittances from overseas Filipino workers (OFWs) were not a significant determinant of consumption levels. "This is at odds with what conventional wisdom would suggest," the BSP economist said. "Usually, we assume that consumer spending will increase if there is an increase in OFW remittances. It turns out this isn’t necessarily true." Maybe OFW families are saving more of their money… in dollars and abroad!

The answer to our question on sustainability is obvious, unless you are a politician desperately trying to hold on to political power.

Think Of The Country, Stupid!

Here’s a reaction to one of our columns last week e-mailed by one of our readers, a doctor, but not Dr. Ernie E.

Your column on winnability as a primary reason for choice is right on. But there is a second one – l hear the masa saying they will vote so and so because he/she did/will help them - now that may be understandable BUT the upper class also says the same thing sometimes camouflaged with "she is a known factor" – read – we know how to maneuver around... MBC for GMA??? today’s sub headline.

JFK must be saying from up there to our country – "you got it all wrong, my friends – it should be the other way around." Patronage politics is part and parcel of the American democratic system – accent on part. The problem here is, it’s the ONLY thing.

Pork Chops

This current war between the House and the Senate on the National Budget is really another reason why we should insist our legislators save us a lot more money than the P60 million Joe de V says we will save by re-enacting last year’s budget. If it is true that the senators only want a new budget so they can get their hands on an increased pork barrel fund of P200 million each, let the senators say it isn’t so by agreeing to delete all pork items. Two hundred million times 23 senators plus the pork the congressmen will also give up (to show sincere concern about our state of finances) is a lot of money taxpayers can save for more productive endeavors than the care and feeding of windbags.

Of course that’s not going to happen. A number of senators are running for re-election and two of them are running for vice president. They need all the money they can get. Then again, Ping Lacson gave up his pork and Joker Arroyo is saving the taxpayers a lot of money by not even hiring staff. So they have any shame left, it shouldn’t be so difficult or impossible to get the rest of the Senate to remove that one reason for the public to doubt their sincerity.

We also know that the money tag they put on the budget is wishful fiction. The national treasury barely has enough money for basic needs, including salaries and debt service and little else. It is tragic that given the need to pinch pesos, our lawmakers insist on getting their pounds of pork. Mahiya naman kayo, mga bossing!

Pare Parehong Buwaya

Here is something in The Economist that you can’t migrate only because you want to run away from our kind of politicians. "They" are all the same.

Europe’s governments rejected a pay rise for members of the European Parliament. The French, Germans, Swedes and Austrians said the rise, which would have given MEPs more than domestic parliamentarians, was too big.

MEPs had proposed the increase in exchange for giving up their practice of inflating travel expenses to boost their incomes: presumably the practice will now continue.

Grave Marker

It is as if Dr. Ernie read the same item in The Economist. Here’s Dr. Ernie’s contribution today.

A woman and her young daughter were visiting the grave of the little girl’s grandmother. As they were walking around the cemetery, the little girl asked, "Mommy, do they ever bury two people in the same grave?"

"Certainly not!" replied the mother, "Why would you ask such a thing?"

"‘Cause the tombstone back there said "Here lies a politician and an honest man."

Boo Chanco’s e-mail address is [email protected]