‘Philippines Now in Recession’
Even as the administration continues to deny that the global economic turmoil will push the country into a deeper crisis, independent think-tank IBON Foundation today said that the Philippines has effectively started to enter a recession.
Speaking at the IBON Birdtalk yearend briefing, IBON research head Sonny Africa said that the economic growth in 2008 has already fallen by nearly three percentage points, and adverse trends in joblessness, falling real incomes, and worsening poverty will deepen this year.
“To indicate a recession in the Philippines, two consecutive quarters of decline or negative growth in real gross domestic product do not have to happen,” Africa explained. “This rule of thumb is particularly inapplicable in the Philippines given its chronic crisis and where even positive growth rates can be accompanied by high and rising unemployment, falling incomes, increasing poverty and deteriorating welfare.”
It is expected that GDP growth in 2009 will be half or even less than in 2007 which would be the slowest since at least 2001. While government projects optimistically high rates, these are still adjusted downwards virtually every time new figures are released. The sluggish growth in the coming period will likely see the country returning to the low growth path of the 1990s.
There are also alarming trends when looking at national income from the expenditure side, said Africa. Growth in personal consumption expenditure in the first three quarters of 2008 of 4.6% is a steep drop from the same period in the year and threatens to make the full year figure the lowest since 2002. The consumption slowdown is worrisome for an economy with such a large population that, for lack of incomes, is already underconsuming as it is. Government consumption expenditure slowed even more drastically to 4 % as it grapples with its unresolved fiscal crisis and belying claims that it is pump-priming the economy.
The marked slowdown in investments in fixed capital formation, to 4.4% in the first three quarters of 2008 from 13.5% in 2007, is also ominous in foreshadowing deteriorating productive capacity in the period to come, he said. This expenditure item covers durable equipment and construction. There was also a notable drop in exports growth from to 2.4% in the first three quarters of 2008 from 6.1% in 2007 – reflecting just the global slowdown since the start of the year and not yet even the sharp turn for the worse after September 2008. Growth in total merchandise exports was just 0.4% with negative growth and outright contractions in the most significant export items: semiconductors fell 3.8%, finished electrical machinery fell 23.2%, and garments fell 4.9 percent.
These are the signs of a frail Philippine economy poorly equipped to deal with crisis: a narrowing productive base for generating jobs and incomes, weakening ability to consume and even invest, limited political will to substantially pump-prime, and undue dependence on exports and remittances, said Africa. “The risk is real that the downturn that started to worsen in the last half of 2008 is the beginning of another long period of stagnation and recession,” he said.
IBON Foundation, Inc. is an independent development institution established in 1978 that provides research, education, publications, information work and advocacy support on socioeconomic issues.