Sunday, September 25, 2005

Economy unscathed

by Sec. Rigoberto Tiglao

The Sept 22 Social WEather Stations' Press Release blared: "Hunger rises to 15.5%." Media, of course, echoed the line. Practically buried in the press release was the more fundamental trend emerging from its opinion survey.

For August (or more accurately from Aug. 26 to Sept. 5, the survey period), 49 percent of those polled perceived themselves to be poor. This was a sharp decline from 57 percent reflected in the SWS survey in May.

Significantly, the 49-percent, self-rated poverty incidence is the third lowest since 1983, or in the 22 years the SWS has been polling on this indicator.

The lowest self-rated poverty incidence in the SWS series was recorded at 43 percent in March 1987, during President Cory Aquino's term. But that was quite obviously a fluke or a polling error. Except for March 1987 and the succeeding poll in October that year, the self-rated poverty incidence in the other 11 polls conducted during Aquino's term always went over 60 percent.

The second lowest self-rated poverty incidence was recorded by SWS in March 2004 under President Macapagal-Arroyo, at 46 percent.

The drop in self-rated poverty incidence isn't really surprising, as President Arroyo has been continuously pushing her bureaucracy to accelerate anti-poverty programs. For instance, from July 2001 to May 2005, government provided some P20.8 billion in micro credit to 2.2 million borrowers nationwide. That would certainly have had an impact on poverty incidence.

And even at the height of the political storm, new anti-poverty programs were being pushed. For instance, the President prodded government financial institutions to allocate P900 million for microfinance starting early June. By July, these GFIs had got their boards to approve P600 million.

Despite all the whining and noise of the political mob, there have been improvements in our nation's fight against poverty. The following figures are data from the SWS (

President SWS Poverty Incidence % Official Poverty Incidence %

Marcos 65 44
Aquino 67 40
Ramos 60 33
Estrada 56 28
Arroyo 51 25

Note: Second column figures are the average of the findings in the last three SWS polls vis-รก-vis each president; except for Marcos, with respect to whom only two polls were made.

The SWS' latest data are also quite significant in the fact that the lower self-rated poverty incidence was registered during a period of political turmoil-that is, during the big push to overthrow the President. Although self-rated poverty incidence is by definition the personal perception of respondents, it often reflects the level of national pessimism, which understandably was expected to be high at a time of political turmoil.

The fact that there was instead optimism during that period-lower self-rated poverty incidence-could mean two things. On the subjective level, Filipinos simply disregarded all the political noise which the elite in Manila were all so absorbed with.

On the objective level, our economy was unscathed by the political storm. This was remarkable considering that crude oil prices doubled this year from its 2000 levels. The decrease in the number of people saying they were poor simply reflected the impact of an improving economy.

Another way of looking at it is that there was such a growth momentum before the political storm hit that the economy just shrugged off all the doomsday scenarios.

This is borne by economic figures in the past several months. In particular, two major macro-economic trends show the improved conditions in which the SWS respondents found themselves in.

Gross Domestic Product, or economists' term for the total value produced by an economy, grew by 4.8 percent in the second quarter of 2005, stronger than the first quarter growth of 4.6 percent. Our country fared better than that of Malaysia (4.1 percent), South Korea (3.3 percent), and Taiwan (3 percent).

The unemployment rate decreased in July 2005 to 7.7 percent from 8.3 percent in April 2005. This meant a million more Filipinos getting jobs since last year.

When the impeachment proceedings against Estrada started in the third quarter of 2000, the peso's exchange rate fell from P43 to the dollar to P51 just before he quit the Palace, a huge P8-loss in the peso's value that certainly forebode a chaotic period. In contrast, the peso exchange depreciated only by 3 percent since June this year, the consensus among analysts is that this was due not to capital flight-as in the case of Estrada's impeachment-but to the surge in oil prices which required more dollars for crude imports.

It is what is called the international balance of payments (BOP)-the net of our transactions with the world-which is the biggest factor in pressures leading to the depreciation of the peso. A build-up of deficits-which means we are spending more dollars than we are receiving-leads to the fall in the peso's value.

This didn't happen in the past three months. In fact, the BOP posted a huge $2-billion surplus in the first seven months of the year, a complete reversal of the $93-million deficit in the same period last year. This was due mainly to the following developments:

Exports for the period January-July 2005 increased to $23 billion, up by 4.6 percent from $22 billion last year

Foreign investments in the stock market and other short-term instruments registered as of Sept. 9, 2005 a net inflow of $2 billion, 13 times more than the $153 million registered in the same period last year and 4.1 times more than the $486.8 million total for the whole of 2004.

Remittances from Filipino workers overseas grew to $5.8 billion in the January-July 2005 period, up 22 percent from the $4.7 billion for the same months last year.

The number of tourists grew to 1.5 million for the first seven months of the year, up by 13.5 percent from the 1.3 million recorded in the same period last year.

The Philippine stock market also showed resilience in the face of the political storm. The Phisix, the stock market indicator, even strengthened and peaked at 2,038.10 points on Aug. 12, 2005. It declined though in mid-August because of the surge in oil prices which threatened the global economy. It has started to recover though, moving again to the 2,000-point mark in the past two weeks.

Finally, despite all the political noise, government has kept firm control of its purse. The budget posted a surplus of P1.8 billion in the month of August, its third surplus in a month this year. Revenues from January to August amounted to P530.2 billion, 1.6 percent above target, while expenditures amounted to P610.9 billion, 5 percent below the program.