Wednesday, March 1, 2023

THE economy comes back to life but leaves the farmers dead.
The Philippine economy grew by 7.6 percent in terms of gross domestic product (total value of local goods
and services) in 2022. After being battered the previous year due largely to the rippling morbid effects of the Covid-
19 pandemic, an economy that regains health is refreshing news to everyone.

I quickly add that for the economy to pick itself up from what seemed to be an eternity of mugging, the
promise of relief would still mean differently for the rich, the almost rich, those neither rich nor poor ("sakto lang"),
the poor, and the wretched poor.
The rich need a vibrant economy so that the portion of their wealth that funds businesses will continue to
grow.
The poor need those businesses to grow so they can have access to job opportunities by which they are able
to get by from survival wages. Their role is to provide back-breaking labor that pads the wealth of capitalists.
The wretched poor need the poor to survive so that the informal labor and services sector will be able to
produce scraps and leftover food for their daily meal.
The 7.6 GDP growth rate for last year had the government understandably applauding itself for what it
hopes people would acknowledge as a job well done.
The Presidential Communications Office (PCO) said in a press statement last week that "President
Ferdinand R. Marcos Jr.'s good economic stewardship resulted in the Philippines posting 7.6 percent full-year
growth in 2022, the highest in 46 years since the country recorded 8.8 percent growth in 1976."
Why the applause gets somewhat muted from among the ranks of the poor can be inferred from a breakdown of the
elements that contributed to the growth of the GDP.

Government reported that GDP "posted a growth of 7.2 percent in the fourth quarter of 2022, resulting in a
7.6 percent full-year growth in 2022."
The main contributors to the fourth quarter 2022 growth were wholesale and retail trade; repair of motor
vehicles and motorcycles (8.7 percent); financial and insurance activities (9.8 percent); and manufacturing (4.2
percent).
As in previous years, the main contributors to growth last year were the industry and services sectors. The
industry sector grew by 6.7 percent, services sector by 9.2 percent, and agriculture, forestry and fishing sector by 0.5
percent.
The industries which contributed the most to the annual growth were wholesale and retail trade; repair of
motor vehicles and motorcycles, 8.7 percent; manufacturing, 5.0 percent; and construction, 12.7 percent.
Financial and insurance services, the playground of the rich, again towed everyone else in the growth sprint. No
surprise here — for ages now, they have been leading the main contributors to GDP. Banks and insurers make
money regardless of whether people are getting richer or poorer. They press their borrowers or policy holders to pay
even in times of distress. In the darkest of days, they can hide in a corner with government securities and come out
several folds richer after a period as short as 90 days.
There is also nothing surprising with the bedridden agriculture sector. This sector is supposed to provide
livelihood for farmers and fisherfolk, the main category of income earners that constitute the poorest segments of the
population. When such a large sector (in terms of labor force population) remains sick with hardly any relief in
sight, as indicated by its negligible contribution to the economy, one can see how thinly spread the value of the
sector's production is among those who depend on it for a living. For many, there can be no escaping from internal
displacement except to flee to urban areas. They end up scavenging scraps and leftover food for survival.
From the margins to the center, the cycle of want impacts on many other issues that result from urban migration.
The carrying capacities are pushed to the limit as congestion builds up and demand for basic services rises.
For decades the call for government to effectively address the ailing agriculture sector has been loud and clear.
Packets of palliatives may have been offloaded here and there, but the needed effect where a large segment of the
population can reliably depend on farming for a living has yet to materialize.
The template appears to be importation whenever there is short supply of farm commodities, with the effect
of driving their prices up and hurting consumers. In most cases, however, there is no way of knowing whether such
shortages are the result of local producers being unable to deliver or unseen forces are at work to manipulate supply
and market prices.

DEFINITION OF TERMS:
GDP measures the monetary value of final goods and services—that is, those that are bought by the final user
—produced in a country in a given period of time (say a quarter or a year). It counts all of the output generated
within the borders of a country.
January 31, 2023

Last week the Philippine Statistics Authority released year-end data on the national economy, and all things
considered the numbers are looking pretty good. For 2022 as a whole, the economy grew by 7.6 percent compared to
2021. Year over year, the service sector expanded by nearly 10 percent in the fourth quarter while household
consumption was up 7 percent.

This makes sense, given that pandemic era restrictions are ending and people can go out and engage in every day
commercial activities again. By comparison, industrial production saw a more modest 4.8 percent rise in the fourth
quarter, so it appears post-pandemic growth is being primary driven by increased consumption and its impact on
service industries.

This is good news for President Ferdinand Marcos Jr. Just a few months ago, many economic forecasters were
predicting a global recession in 2023. While ASEAN as a whole was expected to grow even as the world economy
stagnated, a global recession would still impact the Philippines by lowering demand from foreign trade markets and
squeezing investment.
Global recession in 2023 no longer seems like a sure thing, with the United States closing out 2022 with decent GDP
growth and inflation appearing to cool. But even back in October the Marcos Jr. administration evinced quite a bit of
confidence in the economy. Going against the grain, the 2023 budget features spending increases in many areas.
This expansionary fiscal stance was based on a projected 2023 growth rate of around 7 percent, which seemed
optimistic at the time. But these 2022 year-end figures suggest those forecasts were not that unrealistic.
We shouldn’t be too surprised to see rapid growth year over year in 2022. The pandemic caused the
Philippine economy to drastically shrink in 2020 and many sectors, such as service industries, were forced to sit idle.
As things swing back into full gear and previously idled industries are revived, we would expect to see large initial
year over year percentage increases as the economy makes up the ground it lost during the pandemic. It remains to
be seen whether a growth rate of 7.6 percent can be maintained in 2023 and beyond, especially as consumers may
not keep spending at the current pace indefinitely.

A stronger peso in 2023 will come in handy, as inflation remains high and the Philippines continues to run big trade
deficits. December 2022 saw a trade deficitof $4.6 billion and a headline inflation rate of 8.1 percent. A stronger
peso and moderating commodity prices in 2023 mean that budget-busting imports like energy should contribute less
to inflation in 2023.
As for the trade deficit, that is nothing new in the Philippines, particularly during the Duterte years as infrastructure
development and investment boosted demand for imported capital goods. It’s generally offset to some degree by
large inflows of secondary income from Filipinos living and working abroad, who remit a portion of their earnings
back home. We will have to wait and see the extent to which these inflows offset the trade deficit in 2023, and its
impact on the current account as a whole.
All things considered, these GDP figures are good news for the Philippine economy and for the new president, who
on economic issues wants to continue the steady gains of his predecessor. The big difference is that economic
growth under Duterte was led by investment and fixed capital formation, and this 2022 economic boom is more
consumption-based.
It remains to be seen whether consumption-led growth can be sustained at this level, and whether the 2023 budget
does enough to cushion the impact of higher prices on consumers. The impact of persistent trade deficits on the
current account and the currency are also something to keep an eye on. But these figures show that 2022 closed on a
relatively high note, and that some of the more optimistic assumptions baked into the 2023 budget may not be that
far off the mark after all.