Think tank notes low-quality Phl growth

By Rose de la Cruz

Every country dreams of economic growth. Some manage to attain even minimal growth while most don’t because of obstacles like geopolitical tensions, inflationary pressures, weak currencies and other factors.

The Philippines undoubtedly managed to grow this year– though a US-based think tank– Global Source Partners Country Analysts Diwa Guinigundo and Wilhelmina Manalac– called it a low quality growth.

Much of that growth came from the informal economy– where self-employed workers operate independently outside of the formal labor regulations, devoid of social protection.

The Philippines’ Labor Force Survey reveals that 38.3 percent of employed individuals fall into this category, underscoring the precariousness of their work arrangements and heightened susceptibility to crises or shocks, Business Mirror reported recently.

The decline in employment as inflation increased in the Philippines in recent months—and vice versa, as unemployment rose when inflation slowed —may have been due to poor quality economic growth, the newspaper cited the think-tank’s Brief.

Guinigundo and Mañalac noted that inflation increased to 4.4 percent in July 2024 and slowed to 3.1 percent in August 2024.

But the country’s unemployment rate slowed to 3.1 percent in July yet increased to 4.7 percent in August. While this was consistent with the negative correlation between unemployment and wages in the economy, the reason could be poor quality economic performance.

“This short-run negative correlation implies that the government may find it unwise to set unemployment targets below the natural rate. For central banks, aside from demand-pull and cost-push supply shocks, inflation could also be triggered by inflationary expectations which could cause the trade-off, or in a few cases, stagflation,” they said.

“This seems to be happening in the Philippines in June and July. But a factor that could also explain it is structural, or the quality of economic growth. While the second-quarter 2024 growth stood at 6.3 percent, it looks like the job-creating impact of higher economic growth was not sustained in the subsequent month,” they added.

They noted that the National Economic and Development Authority (NEDA) may have “missed the point” when it said that the unemployment rate was comparable to the 7.9-percent rate in India and 5.1 percent in China.

“Any percentage increase in the unemployment rate means economic disenfranchisement of those who failed to land a job. The challenge of high incidence of poverty remains in the Philippines,” Guinigundo and Mañalac said.

They recognized that the NEDA is finalizing the Trabaho Para sa Bayan (TPB) Master Plan– a comprehensive employment generation and recovery master plan– to enhance job opportunities and work skills for Filipinos to address unemployment issues..

Likewise, the Konektadong Pinoy Bill will be a good complement to the TPB as the proposed legislation has the potential of hastening upskilling and advancing the country’s digital transformation.

“Moving forward, the expected decline in the inflation rate may be expected to boost private consumption, thus supporting a strong GDP performance. This in turn can paint a more positive employment outlook,” they said.

Recently, the PSA data showed Metro Manila, the nation’s economic and political center, losing the most jobs and creating the least employment in July 2024.

With this, the number of jobless Filipinos increased to 2.38 million in July 2024. This represented a year-on-year increase of 86,000 workers and an increase of 334,000 workers in April 2024.

While 47.7 million Filipinos were employed in July 2024 and this was 3.14 million higher than July 2023, this represented a 657,000 reduction in jobs compared to April 2024.

The PSA noted that 1.02 million youth, ages 15 to 24 years old, accounted for 43 percent of the total unemployed, which was at 2.38 million.

But PSA said things could improve starting this September, the unofficial start of the Christmas season in the Philippines, which could create more jobs, albeit temporary.