Aggressive measures
Arroyo promised to pursue aggressive measures to sustain the growth. Among these, she said, are realigning the national budget to spend more on social services, improving the governments infrastructure network, eliminating regulations that tend to choke the bureaucracy and discourage investments, promoting micro enterprises, and raising productivity in agriculture, which is the lynchpin of the economy.
Neri, who is Arroyos chief economic adviser, said Manila must cut loose from policies that distort market competition. They simply raise the cost of doing business, and deter investments and job creation.
But Lorenzo, of ATR Kim Eng Securities, doubts that the same level of growth would be sustained in the next three quarters. There was frontloading in terms of government expenditures, she said, referring to the 8.6 percent increase in construction that was mainly driven by the election season.
In the Philippines, government construction projects usually go full blast during elections as politicians court the vote of Filipinos. Filipinos elected their senators, congressmen and local officials on May 14.
Taking the election spending in consideration, the 6.9 growth may actually be a fluke, Lorenzo said. But, she added, she was optimistic that sustained investments in the rest of the year would take its place because now that the election is over, the government should be able to go full blast in promoting investment.
We have to increase our productive capacity. The investments, which I imagine would be small but incremental, should start coming in, she said.
Scandalous spending
Ibon Foundation, on the other hand, belied the governments claim that the GDP growth was due to its economic reforms. The growth, the foundation in a statement, is not due to any strengthening of the domestic productive economy but largely because of the scandalous campaign spending by politicians for the May 2007 elections.
According to Ibon Foundations estimates, the total nationwide campaign spending for the recent elections is at least 31 billion pesos, perhaps as much as over 50 billion pesos.
Ibon Foundation called the growth rate a momentary increase that came largely from the service sector. It pointed out that the growth in the transport sector, which is under services, was propelled by the elections 8.8 percent from 0.3 percent last year. The biggest improvement in the transport sector is land transport, the foundation said, which grew 10 percent from negative 0.8% growth last year.
The elections also had an impact on consumer spending. Driven largely by what Ibon Foundation called campaign largesse, retail trade growth to rose 12.1 percent compared to just a 5.6 percent rate a year ago. These were the biggest factors driving growth in the service sector which ended up accounting for 4 percentage points of the total gross national product (GNP) growth of 6.6 percent, the think tank said.
It also pointed out another sign of the elections impact: government spending, which increased by 7.1 percent from a mere 3.7 percent rate a year ago. This is also evident on the expenditure side where government consumption likewise noticeably increased to grow by 13.1 percent compared to 7.6 percent in the same period last year, it said.
Barely any growth
On the other hand, Ibon Foundation continued, there has been barely any growth in the countrys main productive sectors, with the industry sector stagnant at 5.3 percent and manufacturing growth even slowing to 4.6 percent from 5.0 percent compared to a year ago.
Manufacturing growth, it said, would have been slower were it not for the election spending, pointing out that paper and paper products showed a remarkable turnaround — from just 2.7 percent in the first quarter of 2006 to a staggering 9.0 percent this year. The same is true with publishing and printing.
Farm sector growth — agriculture, fishery and forestry — were modest at 4.2 percent, compared to 4.1 percent last year. The government said this was mainly due to the series of typhoons that battered the country late last year.
This deterioration in the countrys productive base goes far in explaining why economic growth has not been benefiting the people, Ibon Foundation said.
The group concluded that the first quarter GDP growth is going to be short-lived, aside from not really being a sign of a strengthening economy.
The economys fundamentals, it said, remain weak and the momentum of free market decay under the Arroyo administrations watch remains an urgent concern. (Carlos H. Conde/davaotoday.com)
2007 Elections
