A Brief Assessment of the Status of Philippine Economy – Is It Growing or Groaning?

ANTO COMETA

Based on the figures released by the National Statistical Coordination Board (NSCB), from the year 2005 to 2006 the country’s GDP Per Capita has increased from 14,186 to 14,653 (in constant 1985 prices),[1] having a growth rate of 5.4% for the fiscal year 2006.[2] Early this year (2007) the incumbent Philippine President, Gloria Macapagal-Arroyo in her public statement announced that the first quarter of the current fiscal year (2007) had a 6.9% growth rate which outstripped last year’s performance. Moreover, Q1 of 2007 had the highest growth rate experienced over the past ten years. Does this entail that the Philippine economy is growing?

In any country or economic society, increase in the growth of the economy could be deemed as something positive. However, we have to carefully examine the country’s sources of economic growth and to which degree it affects the country’s economy in general in order to classify if indeed a certain country’s economy is growing.

How can we say that a certain economy is growing? According to the general definition of economic growth – “it is the increase in value of the goods and services produced by an economy. It is conventionally measured as the percent rate of increase in real gross domestic product or GDP. Growth is usually calculated in real terms, i.e. inflation-adjusted terms, in order to net out the effect of inflation on the price of the goods and services produced. In economic, "economic growth" or "economic growth theory" typically refers to growth of potential output, i.e., production at "full employment," which is caused by growth in aggregate demand or observed output.”[3]

If we look closely at the essentials that directly influence the growth of the Philippine economy we would see that there’s a disparity between the figures and the real situation of the country. Let’s focus on the labor sector of the country. According to the survey conducted by the Labor Force Survey (LFS), as of October 2006 the rate of Labor Force Participation is 64.0%, this figure is lower than 2005 which was 64.8%. However, the Employment rate has increased from 92.6% (As of Oct 2005) – 92.7% (As of Oct 2006).[4] What does this imply? In an article written by Dave Llorito, a noted journalist and researcher focusing on globalization, international trade, business, politics, and public policy affecting urban life, environment, and agriculture stressed that the drop in Labor Force Participation rate from 2005 was an indication that a considerable number of Filipinos opted not to be part of the labor force either because they don’t expect to find a job or they are under (or over) qualified for a specific work. He also stated that the decrease in the underemployment rate was the result of people who got better jobs for the year 2006 were the people who are already part of the labor force.[5]

The growth of the labor and employment sector is a good indicator of the current economic condition a country. The current state of the Philippines reveals that there are a lot of local companies - particularly small and medium industries closing down, downsizing or being bought out by either a larger company or a foreign entity. Increase in foreign investments specifically business process outsourcing (BPO) in the country only suffices the short term and micro level provision of the country’s economic stability. This may appear beneficial in the country’s economy. However, we have to understand the scheme behind outsourcing. The prime mechanism behind every outsourced company is cheap labor. Outsourcing companies do place a high priority in the cost of operations of its business. In order to stay in the industry they must be at the forefront of the movement in the global sourcing market. The current outsourcing industry trend does not promise any stability for the Philippine market since there are a lot of Asian countries particularly China (which opened its door recently to the global market) that is more competitive in terms of labor cost effectiveness.

There are a lot aspects or factors that need to be taken into account in order to adequately say that a certain economy of a country is growing. If I were to base the real GDP Per Capita as the main indicator of the average standard of living of Filipinos as a result of the country’s economic condition, it would be far fetch to assert that the country’s economy is growing even if we base it on the premise that over a decade, the current fiscal year’s growth has been the highest. I guess it would be safe to assume that the country’s economic growth is far beyond mounting.

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[1] National Statistical Coordination Board (NSCB), GDP Figures - National Accounts of the Philippines, 1996-2006, http://www.nscb.gov.ph

[2] National Economic Development Authority, Growth Rate Figure - Gross National Product at Constant 1985 Prices (annual Percent Change), 2006, http://www.neda.gov.ph

[3] Definition of Economic Growth, Wikipedia the Free Encyclopedia, http://www.wikipedia.com

[4] National Statistical Coordination Board (NSCB), Statistics - Labor and Employment, Oct 2005 – Oct 2006, http://www.nscb.gov.ph

[5] Dave Llorito, Philippines Without Borders - Alternative views on the Philippine economy, politics, governance, culture, media, and globalization, Is the Philippine economy hallowing out?, Dec 24, 2006, www.davidllorito.blogspot.com