2009: The Gathering Storm IBON Foundation July 15, 2009
Feb 11, 2016
2009: The Gathering StormIBON FoundationJuly 15, 2009
OutlineUpdate on global crisisImpact on the Philippines Jobs crisis Economic Resiliency Plan as solution?Looming fiscal crisisObsolete globalization
Update on global crisis
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 FDIWorld per capita income growth: -3.7% (UN)World trade growth: -11% (UN), -9% (WTO)Largest trade decline since 1930s
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)
Long-standing crisisFinance- and speculation-driven growth, more intense globalization
Impact on the Philippines
Even before global crisis:Industrial & agricultural decayManufacturing smaller than in 1950sAgriculture smallest ever
Upon crisis:Drastic economic slowdown
Upon crisis:Drastic economic slowdownFalling first quarter 2009 (1Q-09) GDP (gross domestic product) growth4Q-08/1Q-09: negative 2.3% worst in 20 years1Q-08 to 09: 0.4% worst for 1Q in 19 yearsFalling consumption4Q-08/1Q-09: negative 3.1% worst in 14 years1Q-08 to 09: 0.8% worst for 1Q in 23 yearsNote: Despite job creation, increasing deployments & rising remittances (more slowly)
Collapsing exports
Collapsing exportsJan-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): Down 29.6%
Falling investments
Falling investments2007-08 (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)
Slowing remittances
Slowing remittances2008: Deployments 1.24 millionRemittances $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 lessUS (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%)
Jobs crisis
Historic joblessness2001-2008: Ave. 11.2% true unemployment rate: highest in countrys history2008: 10.7 million looking for work = 4.1 million jobless + 6.6 million underemployed (+ 8-9 million Filipinos abroad)April 2009: govt reports lower unemployment, but
Poor quality of jobs & disguising unemploymentApr-2009: 10.8 million looking for work = 4.2 million jobless + 6.6 million underemployed
Poorly earning, non-earning, insecure workPart-time work rose 2.4 M to 14.3 M (now two-fifths of all work) full-time work fell 925K1.3 million out of 1.5 million jobs weak:Domestic household help 138,000Unpaid family work 392,000Self-employed 788,000vs. 45K increase (07), 74K (08), 87K (06)Crowding into shrinking sectors: agri, trade, trade, transpo & communication, real estate, education, health
Governments solutionDo not count unemployed change definitions (Apr-05) and dont count ~1.4 M jobless FilipinosDouble-count jobs for propagandaReport jobs from supposedly economic stimulus or crisis programsReport jobs from jobs fairsPeddle Filipinos abroadA.O. No. 247 (Dec-08)
Economic Resiliency Plan as solution?
P330B =P160 B increase in 2009 natl govt (NG) budgetComprehensive Livelihood & Emergency Employment Program (CLEEP) 460,000-825,000 jobsPantawid Pamilyang Pilipino Program (4Ps) 700,000 HHSelf-Employment Assistance Kaunlaran (SEA-K) 14,105 HHTindahan Natin 1.2 million familiesFood for School 448,043 childrenMicrofinance Lending 250,000 end clientsP40 B corporate/individual tax breaksP30 B additional benefits to GSIS/SSS/ PhilHealth membersP100 B off-budget infrastructure (GOCCs, GFI, private sector)Economic Resiliency Plan (ERP)
ERP: Insignificant increase (1)P160 B increase not a stimulusP1.4 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)
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
ERP: Dishonest recycling (1)ERP reports pre-crisis govt activitiesP160 B: Already included in 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 2008-2012P40 B tax breaks not new corporate (c. RVAT 2005)individual (c. 2008)
ERP: Dishonest recycling (2)CLEEP cannot possibly be creating 460,000-825,000 new jobs no budget, no jobsDPWH, DOTC, DA, DepEDImplicit wage bill (460K-825K):6 months = P22-39 billion12 months = P44-79 billionIf these are all infra, implies P73-263 billion worth of projects yet only P25 B additional in approved budget P10 B stimulus fund + insertions
Looming fiscal crisis
Out of control deficit not due to any imaginary stimulusDeficit target: P40 B (Oct-08)P101 B (Jan-09)P177 B (Mar-09)P199 B (Apr-09)P250 B (Jun-09)
On verge of renewed fiscal crisisJan-May 2009 NG deficit: P123.2 billion7 times deficit last year (P18.8 billion)1Q-09 deficit: P120B = 6.9% of GDPnote: 1Q-02 deficit, P61B = 6.8% of GDP ( whole year, P211B = 5.4% of GDP)Basic causes: Revenue losses from graft & corruption, trade & investment liberalizationSpending bloated by massive debt service & unproductive military spending
Unresolved fiscal crisis
soaring debt service, social service cuts, new taxes2002-06 fiscal crisis resulted in:P3.0 trillion in debt serviceRegressive 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
Obsolete globalization
Globalization always more rhetoric than real (1)Two-faced implementation by US, EU & Japan destructive for Third WorldProtection & 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)
Globalization always more rhetoric than realGuard against renewed globalization offensive due to crisis and search for profits: Rehabilitated IMF-WB with expanded fundsRestarted WTO, ASEAN and other Free Trade AgreementsRelevance and urgency of economic nationalism: Agrarian reform, national industrializationEconomic sovereignty in intl trade & investment
Main messages
The global crisis will be protractedWe are already feeling its adverse effectsThe jobs crisis is worsening govts solution: dont count unemployed, double-count jobs & peddle Filipinos abroadGovt exaggerates its supposed crisis measures to camouflage continued implementation of destructive globalization policiesA 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
Salamat po