Yearend 2009: Economic Shocks, Political Ambitions & Challenges for the People in 2010

On the national economic & political situation

IBON FoundationJanuary 15, 2010

Global crisis update World economy in new period of

lower economic activity with false/shallow recoveries End of debt-driven growth

Another global slump/renewed economic downturn likely Declining stimulus packages from

2010 New asset bubbles

Chart 1: World Real Gross Domestic Product (GDP) Growth, 1970-2009e (%)

3.0

5.2

6.9

(1.1)(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

%

Impact on the Philippines Philippines’ “globalized” sectors deeply

affected by economic crisis, economy effectively in recession since 2009

Economy not “resilient” but developmentally inert – “free market” policies since 1980s have: Weakened economy Distorted growth Increased vulnerability to external shocks Worsened joblessness

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 GD

P

AGRI, FISHERY & FORESTRY

INDUSTRY SECTOR Manufacturing

SERVICE SECTOR

Manufacturing as small as in

1950s

Agriculture smallest ever

18.5%

15.5%

1Q-3Q2009p

Chart 2: Exports of Goods and Services (Balance of Payments method), 2000-2008 and Jan-Sep 2009 (%)

8.010.0

2.4

10.6

4.6

18.3

11.9

(15.6)

(26.4)

(1.5)

-30

-25

-20

-15

-10

-5

0

5

10

15

20

25

2000

2001

2002

2003

2004

2005

20

06

2007

r/

2008

p/

Jan-S

ep 20

09 p/

Year

%

Chart 3: Net Foreign Direct Investment (FDI, Balance of Payments method), 2000-2008 and Jan-Sep 2009 (US$ million)

2,240

1,5421,269

1,854

688

491195

1,403

2,9162,921

0

500

1,000

1,500

2,000

2,500

3,000

3,500

2000 2001 2002 2003 2004 2005 2006 2007 2008 Jan-Sep2009 p/

Year

US$

mill

ions

Chart 4: Monthly Overseas Filipino Remittance Growth, 2005-October 2009 (%, year-on-year)

37.2

30.0

6.7

0

5

10

15

20

25

30

35

40

Month

%

2008: 1.24 million deployedJan-Nov 2009: 1.29 million deployed

(3,845 per day)

Chart 5: Philippines Real Gross Domestic Product (GDP) Growth, 1999-2008 and 1st-3rd Quarter 2009 (%)

3.4

4.4

3.0

4.34.6

6.2

4.95.3

7.1

3.8

0.70.0

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 1Q-3Q2009

Year

%

Chart 6: Real Gross Domestic Product (GDP) Growth Per Capita, 1999-2008 and 1st-3rd Quarter 2009 (%)

1.2

2.9

2.3

2.8

4.2

2.93.3

5.0

(0.3)

1.8

(1.2)(2.0)

(1.0)

0.0

1.0

2.0

3.0

4.0

5.0

6.0

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 1Q-3Q2009

Year

%

State of people’s welfare People’s welfare worsened –

Rising joblessness Growing poverty Aggravated by militarization & other

man-made disasters following natural disturbances

Record joblessness (unemployment rates) 2001-08 : 11.2% 2009 : ~11.0%

IBON’s Oct-09 national survey 71% of Filipinos

rate themselves as poor

~ 4.3 M unemployed 35.1 M employed, but poor quality work:

4.2 M “unpaid family workers” 12.2 M “own-account workers” Among “wage & salary workers”

~ 4.7 M “non-regular” (i.e., contractual, casual, probationary, apprentice, seasonal)

~ 11.7 M “no written contracts” (i.e., none, verbal contracts only)

1 out of 3 jobs (12.8 M) part-time work ~ 25.4-32.4 million25.4-32.4 million

jobless or in poor quality work

2009 (IBON estimates on NSO data): labor force ~ 39.4 million

Migration & underdevelopment Unprecedented dependence on

overseas work/remittances a sign of backwardness & underdevt

Limits of overseas work as economic lifeline being reached Adverse affects on welfare of OFWs

and families Creating greater problems for

economy as a whole

Chart 7: Overseas Filipino Worker (OFW) Deployment Growth, 1981-2008 and Jan-Nov 2009 (in %)

18.8

13.3

38.0 37.9

14.7

11.7

(30)

(20)

(10)

0

10

20

30

40

50

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

Jan-

Nov

-09

Year

%

Chart: Overseas Remittances, 1980-2008 (US$ million, % of GDP)

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008

Year

US$

mill

ion,

cur

rent

0

2

4

6

8

10

12

% o

f GDP

OFW remittances (US$ million)

As percentage of GDP (% )

1980-90:Slowly rising share of GDP

1990-2004:Rapidly growing

share of GDP

2004-2009:Flat (falling?) share of GDP

Renewed fiscal crisis Descent into fiscal crisis will

accelerate in 2010 – Drastic implications on social

services Portending greater tax burdens Leading to greater instability

Chart 8: National Government (NG) Deficit, 1999-2009e/2010e (PhP billion and % of GDP)

(210.7) (293.3) (390.3)

(5.4)

(3.8)

(4.9)

(450)

(400)

(350)

(300)

(250)

(200)

(150)

(100)

(50)

01999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Year

PhP

billi

on

(6.0)

(5.0)

(4.0)

(3.0)

(2.0)

(1.0)

0.0

PhP billion

% of GDP

644 B 746 BTotal debt service

Land and livelihoods Deepening rural poverty and

failure of agrarian reform National resurgence in peasant

struggles for land & livelihoods

Hacienda Luisita, Tarlac (Cojuangco-Aquino)

Hacienda Looc, Batangas (Fil-Estate/MSDC)

San Miguel, Bulacan (Villafuerte)

Fort Magsaysay, Nueva Ecija (7th ID, AFP)

San Miguel, Leyte (Veloso) Bago, Negros Occidental etc…

Predatory democracy 2010: country in most advanced

state of political crisis since Marcos dictatorship

GMA’s gambit Charter change untenable

for now, Arroyo efforts shifted to May 2010 elections and laying political groundwork for maneuvering under next admin

Political crisis to new and higher level if 2010 elections don’t achieve minimum of credibility – and especially if Arroyo clique resorts to more extreme measures

Elections and change “Change” an

underlying theme of elections out of extreme dissatisfaction with Arroyo government – but prospects under next administration limited at best (however elections play out)

Testing democracy Elections are

unique in seeing parliamentary Left again seeking to expand influence to the national level and engaging in coalition politics

Change beyond elections

Worsening crises has sharpened public desire for change + driven social/mass movements + revolutionary armed groups

Under current economic and political circumstances, cha-cha is change for the worse even in next administration

Key elements for 2010 optimism: Radical socioeconomic reforms, realizing democracy1. Improved level of political stability by

thwarting ruling Arroyo clique’s maneuvering to stay in power – clean, credible elections

2. Entry of progressives/pro-people candidates into national level politics

3. Reliable process of holding Arroyo clique accountable for transgressions

4. Momentum to democratization process – stop State-sponsored attacks

5. Solid repudiation of obsolete globalization policies causing such economic damage

Key elements for 2010 optimism: Radical socioeconomic reforms, realizing democracy6. Explicit strategy to build domestic

economy and reduce reliance on external sources of growth

7. More equitable distribution of economic gains to the direct producers

8. Addressing fiscal troubles in a pro-people manner

9. Increasing public spending on social services to improve welfare of crisis-battered population

111 Grassroots & people’s movements as building blocks of democracy

Salamat po