Economy grew 7% in Q2, but cracks starting to show

The strong 7-percent economic growth in the second quarter revealed several kinks in the economy, including a possibly slowing pace of progress, official data showed and which President Duterte’s officials admitted, saying major changes were, indeed, needed to fix the huge wealth gap.

The recent figures covered the final months of the Aquino administration (President Duterte started his term at the beginning of the second quarter), capping six years of successive growth that helped boost the country’s credit ratings and end its reputation as one of the region’s economic laggards.

But the elite, who comprise less than 10 percent of the population, have cornered the benefits from this growth, while 25 percent of the 100 million population live below the poverty line.

The research group IBON said that despite the seemingly robust 7-percent growth in the second quarter and the 6.9-percent growth in the first semester this year, the economy was at its weakest, compared to the past five election years, including 2016. Bold changes in economic policies are thus, needed to achieve sustained higher growth, the think tank said.

Comparing data from past years, IBON said the growth rates in gross domestic product (GDP) so far this year compare poorly with previous election years.

The second-quarter growth this year was lower than the 7.9 percent in 2013; the 8.9 percent 2010; the 7.6 percent in 2007 and the 7.7 percent in 2004. The expansion in the first semester was also lower than in 7.7 percent in 2013, the 8.7 percent in 2010, the 6.9 percent in 2007, and the 7.5 percent in 2004.

This indicated weaker economic fundamentals that almost negated the overall impact of the election-spending stimulus, IBON said.

The think tank added that the second-quarter growth results virtually confirmed the country’s economic slowdown, and for the entire year, growth is likely to be slower than the recent peak of 6.9-percent growth in 2013.

IBON said the economy has to grow by at least 7 percent until the end of the year to even just match its performance in 2013.

“Post-election quarterly growth, however, is usually markedly slower and there have only been two election years in the post-Marcos period, in 1995 and 2001, when growth accelerated rather than slowed,” IBON said.

It added that the supposed rapid economic growth has not made much of a dent in the country’s high joblessness and chronic poverty.

The prospects for the majority of Filipinos can only worsen with slowing growth, IBON warned the government.
Farmers and fishermen have been the hardest hit. The country has already been losing some 73,000 jobs yearly in their sector over the course of Aquino’s term, reducing jobs in the industry to just 11.3 million.

“Comparable employment data for the year so far is not available but the negative 3.3 percent agricultural growth in the first semester could mean over 100,000 jobs more lost,” IBON added.

Mr. Duterte’s economic managers, therefore, need to take the long view, IBON said.

The administration’s electoral mandate and pro-poor bias should be reflected in a bold economic program that breaks land monopolies, gives substantial support to agriculture and rural development, and unleashes farmer productivity, Ibon said.

“It also needs national industrialization.

This means actively building and supporting Filipino industry even if this unsettles domestic oligarchs and will be opposed by foreign investors preventing the rise of Filipino industrial competition.

These are needed for sustained higher growth that improves the lives of millions of Filipinos,” the think tank said.