* This is my article last Sunday in interaksyon.com.
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Table 1. Sectoral Growth of Philippine Gross Domestic
Product (GDP), 1stQuarter 2013, in Percent
Source: NSCB presentation
The main contributor remains the service sector,
particularly finance (which includes the stock market) and public
administration.
A government moratorium on new permits has punched a deep
hole in the mining sector, resulting in its deep output contraction. But this
didn’t prevent the industry sector from turning in high growth. And what were
responsible for this? First is construction, both government and private
sector.
The big number of cranes on tall structures that work day
and night in many parts of Metro Manila and in other big cities in the
provinces are a testament to fast growth in private construction.
Some people argue that the
growth was not impressive because it was driven by election-related spending.
How true is this claim? Let us check the numbers.
Table 2. Philippine GDP at Constant Prices ,
1st Quarter, In Billion Pesos
Source: NSCB Statistics
Of the past five election years marked in red, growth was
indeed high in four of them. In 2001 though, the political instability that
accompanied the downfall of then President Joseph Estrada slowed down economic
activity.
An election is not only about high spending by the
government to support the administration candidates, but also huge private
spending by the candidates, their supporters and families/clans. Thus,
suppressed spending in previous quarters would surface as high spending in the
first and second quarters of an election year.
So assuming that the country’s GDP growth in the first
quarter of this year was “over-rated, exaggerated, meaningless,” wouldn’t this
show up when we stack our performance against that of other countries? Let’s
see the data in the table below.
Table 3. GDP Growth of Selected Countries in
1st Quarter 2013, in Percent
Source: The Economist, June 1st 2013, Output,
Prices and Jobs
All the developed and “tiger economies” of East Asia –
Japan, South Korea, Taiwan, Hong Kong and Singapore – grew ever so slowly. But
at least they escaped the contraction that has befallen European economies. The
entire Euro area has an average of -1 percent change in output in the first
quarter of this year.
The current global economic condition and short-term
outlook is not good. Slow growth in the US, Japan and other Asian tigers, and
contraction in Europe. The emerging economies of Asia, including the
Philippines, are showing promising growth.
There is one notable factor for the rather fast growth of
these Asian emerging economies -- China, India, Indonesia, Philippines,
Thailand and Vietnam -- they all have high population growth rates. Pakistan
has yet to release its first-quarter GDP data, but its 2012 growth was 4.2
percent, comparable to that of Malaysia.
As for those countries where growth has slowed or the
economy has contracted, they have one thing in common: greying populations.
Public spending is high for healthcare, pension and other services for the big
number of senior citizens relative to their total population. Many of such
spending is not covered by domestic revenues, so those governments keep
borrowing huge amounts of money, which negatively affect their overall fiscal
condition amid high interest payments, which is passed on to the rest of the
economy in the form of a low or even negative business outlook.
----------------See also:
Fat Free Econ 39: P57,000 Public Debt Per Filipino, February 25, 2013
Fat-Free Econ 40: IMF Irrelevance, March 16, 2013
Fat-Free Econ 41: Cut Income Taxes, April 08, 2013
Fat Free Econ 42: NSCB vs SWS Data on Poverty, April 30, 2013
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