Duterte’s jobless economic boom

by Panos Mourdoukoutas, Feb 10, 2019

The problem with President Rodrigo Duterte’s jobless booming economy in the Philippines isn’t the liberal economic policies his administration has been pursuing. It’s the persistence of corruption and cronyism and cultural populism that divide up Filipinos — and limit job opportunities for those on the wrong side of the “system.”

The Philippines economy has been growing fast under Duterte. GDP annual growth reached above 7% in 2017, before tapering off to 6.2% in 2018.

That’s well above the 5.5% it hovered around in 2015-16. It’s also well above the country’s long-term potential.

GDP annual growth rate in Philippines averaged 3.72% from 1982 until 2017, reaching an all-time high of 12.40% in the fourth quarter of 1988 and a record low of -11.10% in the first quarter of 1985, according to Tradingeconomics.com.

The trouble is that the ‘boom’ hasn’t created that many jobs, when compared to previous administrations.

That’s according to a recent study by the research group IBON.

The IBON study points to an average annual job creation for 2017 and 2018 of just 81,000. It also notes that the number of employed only increased by 162,000 — from 41 million in 2016 to 41.2 million — in 2018, according to the Philippine Statistics Authority (PSA).

That’s well below the annual average job creation under Corazon Aquino in 1987-1992 (810,000), Ramos in 1993-1998 (489,000), Estrada in 1999-2001 (842,000), Arroyo in 2002-2010 (764,000), and Benigno Aquino III in 2011-2016 (827,000) also according the PSA.

What can explain this disconnect between a strong economy and an anemic job growth? Certainly not Duterte’s overly market-driven policies, as IBON group claims.

In fact, the Philippines economy is getting less rather than more market driven under Duterte, according to a recent report from the Heritage Foundation, which shows that the Philippines economy is less free under Duterte. The Philippines’ economic freedom score is 63.8, ranking the country the 70th freest in the 2019 Index. Its overall score has decreased by 1.2 points over the previous year.

In 2018, the Philippines rank in the Ease of Doing Business deteriorated to 124 in 2018 from 113 in 2017 and 99 in 2016.

That’s below the country’s long-term average ranking. Ease of Doing Business in Philippines averaged 120.73 from 2008 until 2018, reaching an all-time high of 144 in 2009 and a record low of 97 in 2014.

With the ease of doing business index falling, Duterte’s administration has relied on government rather than private initiatives to stimulate the economy.

“Continued strong economic growth, driven in part by ambitious state-funded infrastructure projects, has allowed the government to prioritize domestic law-and-order issues over economic policy concerns,” says the Heritage Foundation report. “Investors remain concerned about President Duterte’s heavy-handed rule, although Duterte has consolidated support from Congress.”

That “thwarts” development, according to the report, which points the need for further reforms.

“Despite the adoption of some fiscal reforms, deeper institutional reforms are needed in interrelated areas: business freedom, investment freedom, and the rule of law,” adds the report. “The judicial system remains weak and vulnerable to political influence.”

In the meantime, the reasons for the disconnect between strong economic growth and weak job creation in the Philippines must be sought elsewhere. Like the persistence of corruption and cronyism. And Duterte’s cultural populism, which divide up Filipinos into two worlds – one that consists of those who have access to the coalition of private and government groups that control the country’s resources and can get jobs, and one that does not.

Those who exist in that second world either remain unemployed or join the shadow economy and will never be counted as being unemployed.