2009: The Gathering Storm
IBON FoundationJuly 15, 2009
Outline
1. Update on global crisis2. Impact on the Philippines 3. Jobs crisis 4. “Economic Resiliency Plan” as
solution?5. Looming fiscal crisis6. Obsolete “globalization”
Update on global crisis
Global prospects (2009)
Global growth: -2.9% (WB), -1.4% (IMF) US (-3.5%), Europe (-3.7%), Japan (-7.1%) (UN) = 50% of Phil exports, 64% of remits, 67% of FDI
World per capita income growth: -3.7% (UN) World trade growth: -11% (UN), -9% (WTO)
Largest trade decline since 1930s
Global prospects (2009)
190 million jobless (ILO) Plus 50-100 million (UN)
3.1 billion poor (WB-WDI) Plus 105-145 million “will stay poor/become poor”
(UN-DESA) 1+ billion hungry (FAO)
Long-standing crisisWorld Real GDP Growth, 1970-2009e
(1.4)
3.2
5.2
6.9
(2.0)
(1.0)
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
Year
%
Finance- and speculation-Finance- and speculation-driven growth, more driven growth, more intense “globalization”intense “globalization”
Impact on the Philippines
Even before global crisis:Industrial & agricultural decay
Gross Domestic Product, by industrial share (% of GDP, 1946-2008)
18.1
32.723.1
49.2
0
10
20
30
40
50
60
1946
1951
1956
1961
1966
1971
1976
1981
1986
1991
1996
2001
2006
Year
% o
f G
DP
AGRI, FISHERY & FORESTRY
INDUSTRY SECTOR
Manufacturing
SERVICE SECTOR
Manufacturing smaller than in
1950s
Agriculture smallest ever
Upon crisis:Drastic economic slowdown
Philippines Real GDP Growth, 1970-2009e
3.4
4.4
3.0
4.34.6
6.2
4.95.3
7.1
3.8
(1.0)(2.0)
(1.0)
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Year
%
Upon crisis:Drastic economic slowdown
Falling first quarter 2009 (1Q-09) GDP (gross domestic product) growth 4Q-08/1Q-09: negative 2.3%
worst in 20 years 1Q-08 to 09: 0.4% worst for 1Q
in 19 years Falling consumption
4Q-08/1Q-09: negative 3.1% worst in 14 years
1Q-08 to 09: 0.8% worst for 1Q in 23 years
Note: Despite “job creation”, increasing deployments & rising remittances (more slowly)
Collapsing exportsExports of Goods and Services, 1999-2009e
(Balance of Payments definition, in US$ million)
59,278 58,396
41,111
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
1999
2000
2001
2002
2003
2004
2005
2006
2007
r/
2008
p/
2009
e/
Year
US
$ m
illio
n
Collapsing exports
Jan-May-09 (NSO): Down 34.5% 8 months of consecutive decline so far * electronics (-37.5%), clothing (-23.6%)
1Q-09 (NIA): Down 18.2% worst for 1Q in at least 30 years * manufacturing (-7.3%) worst for 1Q in 24 years * Oct-08 to Apr-09: 154,966 workers displaced, of
w/c 58% “flexible work arrgts” (DOLE) 1Q-09 (BoP): Down 29.6%
Falling investmentsNet Foreign Direct Investment (FDI),
2000-2008 (in US$ million)
2,921 2,916
1,520
0
500
1,000
1,500
2,000
2,500
3,000
3,500
2000 2001 2002 2003 2004 2005 2006 2007 2008 p/
Year
US
$ m
illio
ns
Falling investments
2007-08 (BoP, net FDI): Down 48% (to $1.5 B) Although 29% increase in Jan-Apr 2009 (to
$648 M) 1Q-09 (NIA, capital formation):
Down 17% Three consecutive quarters already
(e.g., factories, equipment, construction…)
Slowing remittancesMonthly Overseas Filipino Remittance Growth,
2007-April 2009 (in %)
0.1
4.93.1 2.2
0
5
10
15
20
25
30
35
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Month
%
2007
2008
2009
Slowing remittances 2008:
Deployments – 1.24 million Remittances – $16.4 billion
Jan-Apr 2007: $4.68 B (26.1% growth)Jan-Apr 2008: $5.36 B (14.5%)Jan-Apr 2009: $5.50 B (2.6%)
Fell in 10 out of Top 20 countries (= 96% of all remits): $459 M less
US (fell 10% or US$266M less), UK (fell 9%), Italy (25%), UAE (2%), Hongkong (22%), Taiwan (33%), Bahrain (10%), Kuwait (53%), South Korea (13%), Spain (10%)
Jobs crisis
Historic joblessness
2001-2008: Ave. 11.2% true unemployment rate: highest in country’s history
2008: 10.7 million looking for work= 4.1 million jobless + 6.6 million underemployed (+ 8-9 million Filipinos abroad)
April 2009: govt reports lower unemployment, but…
Poor quality of “jobs” & disguising unemployment
Apr-2009: 10.8 million looking for work= 4.2 million jobless + 6.6 million underemployed
Poorly earning, non-earning, insecure work1. Part-time work rose 2.4 M to 14.3 M (now two-fifths of
all work) … full-time work fell 925K2. 1.3 million out of 1.5 million “jobs” weak:
Domestic household help – 138,000 “Unpaid family work” – 392,000 “Self-employed” – 788,000
vs. 45K increase (‘07), 74K (’08), 87K (’06)
3. Crowding into shrinking sectors: agri, trade, trade, transpo & communication, real estate, education, health…
Government’s “solution”
1. Do not count unemployed change definitions (Apr-05) and
don’t count ~1.4 M jobless Filipinos
2. “Double-count” jobs for propaganda Report jobs from supposedly “economic
stimulus” or “crisis programs” Report jobs from “jobs fairs”
3. Peddle Filipinos abroad A.O. No. 247 (Dec-08)
“Economic Resiliency Plan” as solution?
P330B =1. P160 B increase in 2009 natl govt (NG) budget
Comprehensive Livelihood & Emergency Employment Program (CLEEP) – 460,000-825,000 jobs
Pantawid Pamilyang Pilipino Program (4Ps) – 700,000 HH Self-Employment Assistance Kaunlaran (SEA-K) – 14,105 HH Tindahan Natin – 1.2 million families Food for School – 448,043 children Microfinance Lending – 250,000 “end clients”
2. P40 B corporate/individual tax breaks3. P30 B additional benefits to GSIS/SSS/
PhilHealth members4. P100 B off-budget infrastructure
(GOCCs, GFI, private sector)
“Economic Resiliency Plan” (ERP)
ERP: Insignificant increase (1) P160 B increase not a “stimulus”
P1.4 trillion NG budget only 16% of GDP vs. 24% (1990)
Only 16% increase in non-debt spending (2009) vs. increases of: 20% (1985) 21% (2007) 22% (1997) 23% (1989) 24% (1994) 28% (1990)
Total national government expenditure, 1986-2009 (% of GDP)
24.0
16.1
15.9
0
5
10
15
20
25
30
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Year
%
ERP: Insignificant increase (2) P30 B additional benefits temporary, taken
from future benefits? to GSIS/SSS/PhilHealth members –
P100 B off-budget infrastructure uncertain, if ever 2010 onwards? GOCCs, GFI, private sector
ERP: Dishonest recycling (1) ERP reports pre-crisis govt activities
1. P160 B: Already included in NG budget (Aug-08) Explicitly (budget & beneficiaries)
4Ps (P5 B DSWD) SEA-K (P39 M) Tindahan Natin (P160 M) Food for School (P5.1 B DSWD/DOH)
Implicitly: Much of CLEEP “job creation”
+ Performance bloat? – ex. 4Ps original target 321K over 2008-2012
2. P40 B tax breaks not new corporate (c. RVAT 2005) individual (c. 2008)
ERP: Dishonest recycling (2) CLEEP cannot possibly be creating 460,000-
825,000 new jobs – no budget, no jobs DPWH, DOTC, DA, DepED Implicit wage bill (460K-825K):
6 months = P22-39 billion 12 months = P44-79 billion
If these are all infra, implies P73-263 billion worth of projects…
… yet only P25 B additional in approved budget P10 B “stimulus fund”
+ insertions
Looming fiscal crisis
Out of control deficit not due to any imaginary “stimulus”
National Government (NG) Deficit, 1999-2009e
(287.9)
(210.7)(3.8)
(5.4)(350)
(300)
(250)
(200)
(150)
(100)
(50)
0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Year
Ph
P b
illio
n
(6.0)
(5.0)
(4.0)
(3.0)
(2.0)
(1.0)
0.0
PhP billion
% of GDP
Deficit target:P40 B (Oct-08)
P101 B (Jan-09)
P177 B (Mar-09)
P199 B (Apr-09)
P250 B (Jun-09)
On verge of renewed fiscal crisis…
Jan-May 2009 NG deficit: P123.2 billion 7 times deficit last year (P18.8 billion)
1Q-09 deficit: P120B = 6.9% of GDP note: 1Q-02 deficit, P61B = 6.8% of GDP
( whole year, P211B = 5.4% of GDP) Basic causes:
1. Revenue losses from graft & corruption, trade & investment liberalization
2. Spending bloated by massive debt service & unproductive military spending
Unresolved fiscal crisisNational Government (NG) Deficit Without Privatization
and Oil Price WIndfall, 1999-2009e
(350)
(300)
(250)
(200)
(150)
(100)
(50)
0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Year
Ph
P b
illio
n
Additional deficit w/o oil price windfallAdditional deficit w/o privatization
(211.3)
(103.1)(119.4)
(297.9)
(12.4)? (68.1)?
… soaring debt service, social service cuts, new taxes
2002-06 fiscal crisis resulted in:1. P3.0 trillion in debt service2. Regressive RVAT (Nov-05)3. Falling budget shares, 2000-06:
Education – 17.1% 13.8% Health – 2.1% 1.5% Housing – 1.2% 0.6%
2009-?? fiscal crisis: “sin taxes” (P19-20 B), gasoline taxes + “rationalization” of tax incentives (P10 B) + “simplification” of net income tax (P6 B) New round of cutbacks in education & health
Obsolete “globalization”
“Globalization” always more rhetoric than real (1) Two-faced implementation by US, EU &
Japan… … destructive for Third World
Protection & support in most advanced capitalist countries…: US, UK, Germany, France, Sweden, Spain,
France… (ex. bailouts, subsidies, import controls)
… and others: India, Indonesia, Vietnam, Russia, Ukraine,
Argentina, Ecuador, Turkey, Mexico… (ex. tariffs, import controls)
“Globalization” always more rhetoric than real
Guard against renewed “globalization” offensive due to crisis and search for profits: “Rehabilitated” IMF-WB with expanded funds Restarted WTO, ASEAN and other Free Trade
Agreements Relevance and urgency of economic
nationalism: Agrarian reform, national industrialization Economic sovereignty in intl trade & investment
Main messages
1. The global crisis will be protracted2. We are already feeling its adverse effects3. The jobs crisis is worsening…
• … govt’s “solution”: don’t count unemployed, double-count jobs & peddle Filipinos abroad
4. Govt exaggerates its supposed crisis measures…• … to camouflage continued implementation of
destructive “globalization” policies
5. A renewed episode of fiscal crisis is looming…• … that promises greater debt burdens, cuts in
social service & pressure for even more taxes
6. “Globalization” is obsolete…• … Need for renewed economic nationalism
Salamat po