Rising disenchantment

The Aquino administration submitted to Congress a budget for 2011 that is based on a GDP growth prospect of 5%, and an aspirational target growth of 7 to 8%. A year later, for 2012, it submitted a budget that is based on a slightly faster growth prospect of 5.5 to 6.5%, and with the same aspirational target growth of 7 to 8%.

Sadly, after showing poor execution skills and with a harsher, slower world economy, the Philippine economy is expected to grow at a much slower pace — at 3.7% in 2011 and 4.2% in 2012.

The slow 3.2% GDP growth in the third quarter was a real downer. As a result, many financial institutions, international organizations, and individual economists have joined those who have earlier predicted a slowdown this year and next.

The International Monetary Fund which early in the year predicted a mildly vigorous GDP growth of 5% for 2011 and 2012 has conceded that the Philippine economy has sufficiently slowed due to government underspending and weak exports. Last September, IMF cut its 2011 and 2012 GDP growth forecasts from 5% to 4.% and 4.9%, respectively.

Two days ago, IMF has further cut its 2011 GDP forecast to 3.7%, and only 4.2% in 2012 — a full percentage point cut for 2011 and 0.5 percentage point in 2012. A 3.7% growth for 2011 assumes a slightly strong growth of 4% in the final quarter, as NEDA director general Paderanga is praying for.

They ask: where will brisker GDP growth next year come from? They see more clouds than silver linings.

The global economy is expected to be near recession next year. The uncertainty and political indecisions in many troubled European countries are enough to ensure a recession in the continent. The political uncertainty in the US as the presidential elections approach is going to stall any major policy reforms that will alter the low-growth trajectory of the US economy.

Both exports of merchandise goods and exports of labor will be affected by a slowing global economy. The plunge in Philippine exports could be structural and its decline could further accelerate. The peso value of overseas remittances are leveling off, and the families of OFW are spending money with calculated care. That, ironically, is not good for a faltering economy.

At some point, Filipino seamen who have been a steady source of overseas remittances may be affected by weaker world trade. Host governments are being pressured by their citizens who have been jobless for many years, the result of which is that the demand for overseas workers may decline.

The export of jobs abroad through business process outsourcing has attracted a lot of negative attention from politicians in job exporting countries. A new proposed bill in the US is threatening call center jobs in the Philippines and other countries by withdrawing incentives from US firms that outsource their operations abroad.

At the same time, the Saudization policy of hiring local Saudis in key jobs instead of hiring overseas workers is in full swing. In a more subtle way, this is going on in other countries too.

In the domestic front, the effect of a slowdown, not a contraction, in BPO operations in the Philippines is serious. It will affect the construction and rental of office spaces, the consumption of electricity, water and the other utilities, operations of related activities (McDonald, Jollibee, Seven-Eleven, KFC, coffee shops, and others). Job losses will also affect consumption and investment.

The social tension that a slowing overseas employment prospects and rising joblessness at home will create is mind-boggling. The government should anticipate these emerging sources of social conflict. Words of comfort saying that Filipino OFWs are in great demand and that there are no threats to their job security are vacuous in the face of changing economic landscape. Policymakers beware: it can’t be business as usual.

Growing disenchantment

The November 2011 Pulse Asia survey results show growing disenchantment in the way the government is addressing issues that affect the ordinary man on the street.

A year ago, in October 2010, a majority of Filipinos approved of the Aquino administration’s performance in eight of ten selected national issues: fighting corruption(57%), fighting criminality (62%), enforcing the law to all citizens (58%), increasing peace in the country (56%), stopping the destruction and abuse of the environment (51%), creation of more jobs(59%) increasing the pay of workers (56%), and efforts to control population growth (53%).

In two gut issues, the Aquino government registered less than majority rating: controlling inflation (45%) and reducing poverty (47%).

Fast forward to a year after. A comparison of the November 2011 survey results and the October 2010 survey results shows a sharp decline in citizens’ approval of the Aquino administration on issues that affect them the most: reducing poverty (approval rating of 47% to 32%, or a loss of 15%), controlling inflation (from 45% to 32%, or loss of 13%), increasing the pay of workers (from 56% to 43% or minus 13%), creation of jobs (from 59% to 48% or minus 11%), and fighting criminality (from 62% to 53% or minus 9%).

But the disapproval ratings of the Aquino administration has doubled on issues that affect the poor majority the most. In October last year, 18% of respondents disapproved of the way the Aquino administration was performing on the issue of poverty reduction. In November this year, the disapproval rating on poverty reduction has soared to 36%, double the level a year ago.

As of the November Pulse Asia survey results, more people disapprove (36%) than approve (32%) in the way the current administration is implementing its poverty reduction programs.

But poverty reduction is related to other national issues like job creation, improving the pay of workers, moderating inflation, and, in the long-run, controlling fast population growth.

The disapproval rating on the government’s programs to create jobs rose from 11% in October last year to 21% in November this year, or a difference of 10 percentage points. The number of citizens who disapproved the administration’s performance on job creation has nearly doubled.

On other gut issues the deterioration was equally serious: controlling inflation (from 21% to 37%, or an increase by 16 percentage points), increasing the pay of workers (from 14% to 25%, or by 11 percentage points) and enforcing the law to all, whether influential or ordinary citizens (from 9% to 18%, or by nine percentage points).

The number of citizens who feel that the Aquino administration has failed to enforce the law unbiasedly has doubled. Perhaps many people were reminded of the slow progress in prosecuting those responsible for the abominable Maguindanao massacre. The survey coincided with the second anniversary of the tragic incident.

People’s dissatisfaction with the way the Aquino administration is handling issues to control fast population growth is also rising. From a dissatisfaction level of 13% in October 2010, this has jumped to 25% in November 2011, or by 12 percentage points.

On other issues the disenchantment with the Aquino administration has grown too — fighting graft and corruption lost 7 percentage points; fighting criminality, seven percentage points; equal enforcement of the law to all citizens, nine percentage points; increasing peace in the country, six percentage points; and stopping the destruction and abuse of the environment, six percentage points.

After a year and a half in Malacañang, President Aquino now faces a more challenging social and economic terrain. The Filipino people have become increasingly more impatient and disenchanted even as the economy is slowing and stalling. Quo vadis? –Benjamin E. Diokno, Businessworld