The Economist: growth to slow

From an email list, the following, latest forecast from The Economist Intelligence Unit makes for interesting (and sobering) reading:

Feb 28th 2007
From the Economist Intelligence Unit
Source: Country Forecast

The authority of the president, Gloria Macapagal Arroyo, will remain fragile over the forecast period. In the past year she has survived demands for her resignation, an impeachment bid by the opposition and a reported coup attempt. Meanwhile, attempts to reform the constitution have failed, meaning that mid-term congressional elections will go ahead as planned in May 2007.

A poor showing in these elections by Ms Macapagal Arroyo could see an increase in pressure on her to leave office before the end of her term in 2010. The fiscal deficit will continue to narrow, but the budget will remain in deficit in 2007-08. Private consumption will continue to be the main driver of the economy, although GDP growth will slow slightly from 5.4% in 2006 to 5.3% in 2007 and 5.1% in 2008. Annual consumer price inflation will average 4% in 2007-08. Buoyant remittances from Filipinos working overseas will ensure that the current account remains in surplus.

Key changes from last update

Political outlook

Campaigning ahead of the mid-term elections has officially started.

Opposition parties are hoping to win at least one-third of the seats in the House of Representatives (the lower house). This would allow them to send the president to an impeachment trial in the Senate (the upper house), which is likely to be dominated by the opposition.

Economic policy outlook

The Bangko Sentral ng Pilipinas (BSP, the central bank) kept its key policy interest rates steady, at 7.5% for the overnight borrowing rate and 9.75% for the overnight lending rate, at its latest monetary policy meeting on January 25th. The Economist Intelligence Unit forecasts that the BSP will cut rates later this year, in response to weakening inflationary pressures in the economy.

Economic forecast

Real GDP growth slowed to 4.8% year on year in the final quarter of 2006, taking growth for the full year to 5.4%. We forecast that annual economic growth will slow over the next two years, owing to a fall in the contribution from the external sector.

Though Abe Margallo has some kind things to say on how I tried to explain my thinking on the matter, David Llorito explains it best in essentially three points: (see his December 24, 2006 entry on the “hollowing out” of the job market, too):

1. The government is taking credit for improvements to the economy that aren’t really its doing. Llorito says,

These are real gains, alright, but in truth Malacañang has little to do with it at all. A look at the national income accounts shows the country’s growth was largely driven by consumption financed by remittances, the rapid growth of cyberservices and the recovery in the export sector. The dynamics of these growth drivers have nothing to do with Palace occupants… If one looks at the national income accounts, one sees that the government expenditures in the last three years are flat or negative despite the fact that the government has been collecting higher VAT rates (12 percent) and higher corporate taxes (35 percent). In fact, the government has actually been reversing the policy reforms that the country achieved after the 1986 Edsa people power revolution. The most recent example is the increase in tariff rates for steel products from 3 percent to 7 percent – one that would surely penalize the construction sector.

2. It’s main activity has been “whack-a-mole,” and in stamping out scandals it has let the national budget and infrastructure slide (neither of which, I might add, is the fault of the opposition forces: at no point did the administration lose control of either house of Congress; at no point did it lose control over government departments). As Llorito puts it,

We could have achieved some more, probably on a par with our fast-growing neighbors, if only the government had been really attentive to the pulse of the economy.

3. The opposition is flat-out wrong to say there isn’t growth or that it’s a “mirage”: Llorito writes,

These growth rates are neither a mirage nor too insignificant to bother about, because they are the gains contributed by the country’s private business sector, the entrepreneurs, foreign investors and the OFWs themselves who sacrificed a lot just to send the dollars that the country badly needs. Everybody should recognize this fact. Are the 250,000 new jobs created by outsourcing a mirage? Is the $47-billion export generated by the private sector, about $30 billion of which came from electronics, insignificant?

4. The economy is increasingly politics-proof, and it goes to show that reforms can be built upon by one administration after another, though it takes time to show. As Llorito puts it,

[these] are mostly the fruits of the painstaking policy reforms started by President Corazon Aquino after the 1986 Edsa revolution and were sustained by succeeding administrations. Specifically, the deregulation and infusion of more competition in transportation, storage and communications industries, as well as reforms in the country’s tariff system.

What I like most about Llorito’s article is that he points out there’s much room for optimism, as long as everyone remains realistic. Things take time. And over time, things have changed, often for the better. So cut the crap that “nothing’s changed” since 1986. A hell of a lot has; but it could still be better, and it doesn’t have to mean an either or situation.

There is so much that’s wonderful about how the country’s changed, how things are changing -and so much that’s frustrating about how things aren’t able to change as quickly, and thoroughly, as they might because some people are too myopic to cherish things that matter and cling to things that get in the way of progress.

Read more from Cielito Habito, the economist.

My column for today is Prove it’s a lie. If you think Ang Ladlad deserves accreditation, please contact the Comelec and give them a piece of your mind. I was very happy to receive a copy of an email from a reader, who emailed the Comelec as follows:

To : The Chairman / Commisioners Abalos, Tuason, Sarmiento, Ferrer – COMELEC

I, together with my family, wish to express our support for the Party List group ANG LADLAD and its representative Professor Danton Remoto.

We were hoping to vote for ANG LADLAD or , if it does not get accredited,to vote for Mr. Danton Remoto to the Senate.

It is unfortunate that you refuse to accredit ANG LADLAD, as well as declare Prof. Remoto a nusiance candidate (based on Newspaper reports).

We hope that the Comelec will reconsider its position to give our brothers and sisters who belong to the marginalized sector of LGBT a voice in Congress and / or the Senate.

Alan D. Luzuriaga
Voters Registration No. 34096314

In her column, Sylvia Mayuga also takes up the cudgels for Ang Ladlad and along the way brings up some interesting things:

…Power to grant or refuse party list accreditation in the Comelec under Abalos continues to be a henhouse door wide open to the wolf of trapo politics.

This Armida Siguion-Reyna illustrates in her column, noting the recent accreditation of an association of tricycle drivers called Biyaheng Pinoy – with one Arsenio Abalos, elder brother of the Comelec chair, as director and national council member. She asks, why has Ang Ladlad, (“The Laid Out” or “Out of the Closet”) which applied for accreditation “at the same time if not earlier,” been rejected twice?

Ang Ladlad is of course the first-ever Filipino Gay, Lesbian Bisexual and Trans-gender NGO cum political party, with students, intellectuals, and professionals in a stated nationwide membership of 16,000. Public curiosity has been pricked. For one, Miguel Antonio Lizada of the Sun-Star Davao wants to know if this rejection has “something to do with the fact that Ang Ladlad was leading in the race, next to Bayan Muna (Country First)?”

See also the entries of Bong Austero, of tristantrakand, and Martin Bautista of Ang Kapatiran (despite my reservations, the goofy goings-on in Genuine Opposition are making me take a second look at Ang Kapatiran… can you say, “waning, waning,” FVR-style?) Anyway, for anyone interested, the platform of Ang Ladlad is as follows:

1. Re-filing of the Anti-Discrimination Bill that gives LGBT Filipinos equal opportunities in employment and equal treatment in schools, hospitals, restaurants, hotels, entertainment centers, and government offices.
2. Re-filing of the bill to repeal the Anti-Vagrancy Law that some unscrupulous policemen use to extort bribes from gay men without ID cards;
3. Setting up of micro-finance and livelihood projects for poor and handicapped LGBT Filipinos;
4. Setting up of centers for Golden Gays, or old and abandoned LGBTs, as well as young ones driven out of their homes. The centers will also offer legal aid and counseling, as well as information about LGBT issues, HIV-AIDS, and reproductive health. These centers will be set up initially in the key cities/metropolitan areas of the Philippines: Baguio, National Capital Region, Cebu and Davao.

To gain a seat in the lower house, party-list groups need to garner at least 2 percent of the total votes cast for party-list groups. Additional 2% votes cast for a party-list group will gain another seat. A maximum of 3 seats can be secured by a group for representation in Congress’ lower chamber.

RA 7941 (The Party-List System Act) was enacted on 3 March 1995 to implement Section 5, Article VI of the 1987 Constitution. It provides that 20% (53 seats) of the total membership of the House of Representatives should be elected through the party-list system – commonly known as sectoral representatives. A party-list candidate should get at least two percent (2%) of the total votes cast for the party-list system to qualify for one seat.

Consequently, garnering four percent (4%) of the votes mean two seats; and six percent (6%), three seats.

A paper from 2001 by Fritzie Palma Tangkia and Ma. Araceli Basco Habaradas (available online ) says the party-list scheme is intended to “broaden representation in the House of Representatives to include sectors and those organizations that do not have well-defined political constituencies” and “facilitate access to representation of minority or small parties”:

The basic aim of representative government is to attain the broadest possible representation of all interests in its lawmaking and policy-making body. It becomes necessary to give an opportunity to the various social, economic, cultural, geographical and other sectors of our society, particularly the disadvantaged groups, to have their voices heard. And because they are usually without sufficient funding or political machinery, it becomes incumbent upon the government to extend such opportunity without the need to go through an expensive electoral contest. For this reason, the party-list system has been adopted in the new Constitution to assure them of representation in the highest lawmaking body of the Republic.

Furthermore, the

“heart of proportional representation is inclusion: it seeks to facilitate and ensure the entry and participation of all major interest groups, or at least of as many such groups as possible, in the crucial endeavor of national legislation.” Thus, being a system of proportional representation, the party-list system is “intended to give to marginalized parties or groups access to the House of Representatives” and “to prevent [these] small groups from actually being left out in the democratic process.”

The Party List Act states as the policy of the state that,

Declaration of Policy. – The State shall promote proportional representation in the election of representatives to the House of Representatives through a party-list system of registered national, regional and sectoral parties of organizations or coalitions thereof, which will enable Filipino citizens belonging to marginalized and underrepresented sectors, organizations and parties, and who lack well-defined political constituencies but who could contribute to the formulation and enactment of appropriate legislation that will benefit the nation as a whole, to become members of the House of Representatives. Towards this end, the State shall develop and guarantee a full, free and open party system in order to attain the broadest possible representation of party, sectoral or group interests in the House of Representatives by enhancing their chances to compete for and win seats in the legislature, and shall provide the simplest scheme possible.

In Osmeña vs. Commission on Elections, the Supreme Court pointed out,

The party-list system, an innovation introduced by the 1987 Constitution in order to encourage the growth of a multi-party system is designed to give a chance to marginalized sectors of society to elect their representatives to the Congress. A scheme aimed at giving meaningful representation to the interests of sectors which are not adequately attended to in normal deliberations, it is envisioned that system will encourage interest in political affairs on the part of a large number of citizens who feel that they are deprived of the opportunity to elect spokesmen of their own choosing under the present system. It is expected to forestall resort to extra-parliamentary means by minority groups which would wish to express their interests and influence governmental policies, since every citizen is given a substantial representation.

As for “marginalized parties,” they were defined defined by the late Senator Tolentino, as

[T]hose which, on their own strength as political parties, would not be able to elect Congressmen in the different districts because they would not have the number of votes needed in particular districts [and yet] if these [votes] are combined together on a national basis, they may be able to elect even one or two Congressmen on the basis of proportional representation.

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Manuel L. Quezon III.

51 thoughts on “The Economist: growth to slow

  1. i read the transcript of remoto’s podcast interview. He said he is not advocating for special rights for any body.

    So far, I like his recommendations for the problems about education. hindi kagaya noong kay Escudero na no brainer.

    his answers are diret to the point, unlike kay koko na alam mong wala pang experience panay general ang solution. parang nagpeprescribe ng aspirin sa lahat ng sakit.

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