PH economy so right it’s wrong

IBON Foundation, June 18, 2024

The Marcos Jr administration organized a Philippine Economic Briefing last month for an 800-strong
audience of business leaders, members of the diplomatic corps, academe, civil society and the media. The
briefing tried so hard to show that everything is right with the economy that it only succeeded in showing
everything that’s so wrong with it.

Economic groupthink

There shouldn’t be any doubt that the economy portrayed in the briefing is the government’s official stand
on the economy.

The economic team was in full attendance – from the secretary of finance, the de facto head of the team,
to the secretaries of economic planning, budget and management, trade and industry, agriculture, public
works and highways, and transport. The president’s economic czar was also there even if it still isn’t clear
how his nominal super-authority over the team is being used. If there’s anyone to ask about the state of
the economy and the direction and specifics of national economic policy, it should be these folks.

Looking at the others present in the program is revealing. The resident representative of the International
Monetary Fund (IMF) was there in an inadvertent throwback to when the IMF literally dictated economic
policy to the Marcos dictatorship. Global monopoly capital was well-represented with the American
Chamber of Commerce in the Philippines, Japanese financial group Nomura, and British banking giant
Standard Chartered all figuring prominently in the program. Filipino oligarchs were represented by the
Ayala Corporation.

Most everyone was from among the top 2% of income-earners and wealth-holders in the country, and all
were comfortable talking about the main theme of the briefing: “PH On-the-Go: Fast-Tracking Economic
Progress”. For the government, apparently, these voices in the program are the voices that matter.

It’s conspicuous that no one from the bottom 98% of Filipinos who make up the overwhelming majority
of the economy and 113 million population was in the program. There were waiters and other staff but
they were there just to silently serve everyone attending the event. Even the president’s anti-poverty czar
– who would be a two-percenter like the other panelists if he had the abundance of cars, houses, condos
and money that he brags about – didn’t have a slot.

Catechism of the choir

The keynote speech of the finance secretary opened with a shocker, to anyone who expected honesty and
candor rather than spin and propaganda: “Our economic outlook is the brightest it has ever been.” The
biggest argument made for this was the bold claim that the Philippines would be “an economic giant”
with a “trillion-dollar economy” by 2033. That speech closed with adulating hyperbole that Pres Marcos
Jr is the “bold and decisive leader to fully realize that potential.”

The reality-bending image management of the Marcos family is normalizing political exaggeration even
on economic issues. The economic team must know that the trillion-dollar economy by 2033 is simply
impossible to achieve and making that claim makes them complicit in self-serving political theater.

Measured in real terms at constant 2018 prices, gross domestic product (GDP) was US$399.8 billion in
2023 and the economy has to grow at an impossible 9.6% annually to reach a trillion dollars by 2033.The
claim is not much more possible even looking at GDP at current prices. The US$437.1 billion economy in
2023 has to grow by over 8.6% annually to reach a trillion dollars by 2033.

The economic team didn’t even bother to get their storyline straight. While 8.6-9.6% growth is needed to
achieve the headline-grabbing trillion dollars, the Development Budget Coordination Committee (DBCC)
projections that the budget secretary presented had just 6-8% GDP growth rates over the 2024-2028
period. Even the International Monetary Fund, World Bank, Asian Development Bank, and ASEAN+3
Macroeconomic Research Office GDP growth estimates cited in the keynote speech were only in the 5.8-
6.5% range for 2024 and 2025.

In any case, even these targets won’t be reached. The post-pandemic rebound is over and the economy is
already back to its pre-pandemic trend of slowing real GDP growth which started in 2017 (6.9% growth)
and continued in 2018 (6.3%) and 2019 (6.1%). Economic growth has already slowed to 5.7% in the first
quarter of 2024 from 6.4% in the same period last year. Growth prospects are dragged down by the
protracted global slowdown and could even be disrupted by geopolitical shocks in the years to come.

Yet the program and panelists dutifully reiterated the growth hype and its attendant claims of creating jobs
and reducing poverty to establish the official consensus view on economic matters.

Structures matter

In trying to paint a beguiling picture of the Philippine economy, the economic briefing omitted many
critical pieces of information needed for a more complete and more accurate picture than that which
echoed in the chamber.

There are first of all the economic fundamentals – the latest full-year data shows that the share of
manufacturing has fallen to 18% of GDP in 2023 which is the smallest in 75 years since 1949 (16.3%).
The share of agriculture is also down to 8.6% which is the smallest in the country’s history.

The Marcos Jr administration is so close to the United States (US) government today that it should
perhaps be seeking more advice on why industrialization is so important – the Biden administration is
implementing the most ambitious industrial policy for the US in decades as a matter of national security.
Industrial protectionism is a global trend that the country’s neoliberal economic managers somehow still
seem blind to.

A strong case can be made for giving similar protection and support for agriculture. Agricultural
liberalization and weak government support are among the biggest factors in agricultural production per
capita basically being stagnant for the last 25 years, measured by dividing agricultural value-added at
constant prices by the population. This is the root of growing food import-dependence.

Agricultural and especially industrial backwardness is also the main reason the Philippine economy is so
unable to generate more jobs of better quality. The economic briefing somehow missed out mentioning
the country’s alarming job-losing growth when it spoke of a “vibrant labor market”.

The 48 million employed in the first quarter of 2024 is 288,000 less than in the same period last year and
1.3 million less than in the previous quarter. This is aside from how about 19.2 million or 40% of total
employed persons were in openly informal work in the first quarter of 2024. Including IBON estimates of
some 16-18 million wage workers in unregulated informal establishments, a massive 70% of employment
can be considered as informal work.
The economic briefing spoke of a so-called demographic dividend. And yet, the way the economy is
unravelling is hitting the youth particularly hard. For instance, the number of employed youth in April
2024 actually fell by 417,000 from the year before.

The slowing growth isn’t a puzzle. There can’t be sustainable Philippine economic development without
rapidly improving agricultural and industrial productivity that creates high-paying work. Dynamic
domestic agriculture and national industry creates high-paying jobs and high-earning families can spend
on the products of Filipino farms and firms to create a virtuous spiral of growth and development. This
would, moreover, reduce vulnerability to external shocks.

Inconvenient truths

There was an unfortunate amount of misrepresentation of the economy during the economic briefing. The
economy should presumably be understood as being most of all about the conditions of the majority of
Filipinos who contribute to it and depend on it for survival.

Things have been going in a perverse direction which policymakers should acknowledge rather than
ignore. Employment trends confirm that the economy is not able to move Filipinos out of low-
productivity and low-paying activities and that the most work is being created in the lowest-paying
sectors of the economy.

Nearly 70% of 6.1 million jobs created since the pandemic are in the worst-remunerating sectors of
agriculture (1.8 million), wholesale and retail trade (1.8 million), construction (411,000) and
accommodation and food service (323,000). The average daily basic pay in these sectors is 10-45% less
than the national average.

The lowest-earning sector of agriculture is evidently still a refuge or sector of last resort for those unable
to find jobs elsewhere in the economy. It is also notable that the steadily falling share of manufacturing in
GDP has driven its share of employment down to 7.3% in 2023 which is the smallest on record, astride.
There is more construction than manufacturing employment in the economy since 2017, substantially due
to unsustainably debt-driven public investment.

These broad economic trends combine with attacks on trade unionism to explain why the real value of
minimum wages across the country today is lower than 35 years ago in 1989. There is no reason to expect
informal sector earnings to have been any better.

All these result in rising hunger and widespread poverty that, again, the economic briefing somehow
failed to mention.

Filipino families experiencing involuntary hunger increased to 14.2% in March 2024 from 12.6% in
December 2023, while 46% of Filipino families rated themselves as poor and 30% as borderline in March
2024, according to the Social Weather Stations (SWS). This 76% or some 21.3 million poor/borderline
families and 67% of households without savings according to the Bangko Sentral ng Pilipinas (BSP)
gives a more accurate picture of poverty than official statistics. It’s only the government’s unrealistically
low poverty threshold of just some Php91 per person per day that allows it to claim just 4.5 million poor
Filipino families.

Liberating ideas
The government needs to intervene much more boldly in the economy, which is not to be confused with
its populist shows of aid-giving for political patronage purposes and to defuse social unrest as the mid-
term elections near.

The economic briefing showed the government’s certitude with its policymaking despite how it so starkly
leaves the majority behind. Yet the social and economic distress suffered by tens of millions of Filipinos
will not be relieved and the economy will not be developed by decision-making according to deeply-
ingrained neoliberal economic policies. These policies are deeply flawed and must be challenged.

Walter Lippmann famously said: “Where all think alike, no one thinks very much.” Self-serving political
and economic elites already dominate and control the country’s politics and economics. Yet they do not
also have to dominate and control thinking. Liberation starts with questioning the false narratives being
peddled. ###