Filipinos are living in two parallel universes

IT seems that Filipinos are living in two parallel universes. One is fast growing economically, the other is a sloth enmeshed in the mundane but messy tangle of political intrigue.

In the third quarter this year, the country’s gross domestic product or GDP—the total value of goods and services traded within the country’s borders—grew only by 4.1 percent in the third quarter this year, the lowest since the third quarter of 2002. “The political uncertainty brought about by the impeachment case and the volatility of oil prices weighed in on the country’s gross domestic product…,” said Augusto B. Santos, director general of the National Economic and Development Authority.

However, if one looks at the gross national product (GNP) or the value of goods and services produced and contributed by Filipinos here and abroad, less the value added contributed by foreigners, one sees it surged to 6.5 percent, the highest in the last five quarters.

Thus one can easily observe that the gap between the GDP and GNP is huge. It used to be that this gap is narrow due to the relatively smaller contribution of the so-called net factor income from abroad that sums up the earnings of overseas workers and the incomes they generated from their properties abroad. This quarter, net factor income from abroad surged 39 percent, thus pushing up the GNP to 6.5 percent from 5.7 percent in the same period last year.

“The Philippine economy is undergoing structural transformation,” said Dennis M. Arroyo, director of the national policy and planning services of the National Economic and Development Authority. “It’s getting more and more globalized.”

To the extent that the GDP figure reflects economic activity within the country’s borders, one could sense that the typical Mang Jose in the streets would only feel the sluggish 4.1 percent, especially if he does not receive remittances from a son or a daughter abroad. And those who got those dollars are the ones feeling the “tiger economy” of 6.5 percent GNP. In the last several months ten months, dollar remittances have been growing at double-digit rates within the range of 18-35 percent year on year. These dollars are supposed to grease the wheels industry thus spreading benefits wide around. Problem is, those dollar earners have suddenly grown stingy. They would rather save their money than splurge it, thus constraining the local economy that is already burdened by political deadlock. So if there’s one sector that’s the happiest until December, these are the banks that enjoyed a 16.6-percent growth rate in the third quarter and a 13.2- percent growth rate for the entire first three quarters. So that’s structural transformation for you—a bifurcated economy that separates the OFW dollar earners from those who are not.

Santos says the trend towards high savings among OFWs augurs well for 2006 because it could mean higher expenditures for appliances, vehicles, shelter and durable equipment. Also, more savings may yet translate to more investments as some industrialists might yet be encouraged to mobilize the money for industrial expansion. This should suggest that we are going to have a better economy next year. That’s an optimistic scenario but no one really knows. The real reason could be that OFW families are holding on to their dollars because the country’s politics might get nasty next year. If the future is hazy, the natural instinct could be to store the money for the rainy days.

But there’s another “transformation” going on. For the first three quarters, the agriculture, fishery and forestry (AFF) sector grew only by 1.1 percent. In the same period, the industry sector grew by 4.6 percent and services by 6.1 percent. Estrella V. Domingo, assistant secretary of the National Statistical Coordination Board (NSCB) said that her agency is having difficulties getting information from the business process outsourcing (BPO) industry that has been growing at the rate of 70 percent each year. Thus, she admits that the growth rates of the services sector could be understated.

Understated or not, what the numbers suggest is that growth rates are spatially concentrated in urban areas while the rural sector—where almost half that population resides—stagnated. This is another manifestation of a dualistic economy with its attendant consequences of greater rural-urban migration, greater air pollution, urban congestion, overstretched social services, and the expansion of slums.

During the press conference, Santos and Estrella blamed the lingering effects of El Niño for the sluggish performance of the farm sector. They have a point there. However, what they have failed to account for is that the poor performance of the farms could also be traced to the government’s inability to provide money for rural economic infrastructure. This is shown in the 2.1-percent decline in government consumption and 3.8-percent decline in fixed capital formation in the third quarter. This is so because the government has perennially been suffering from a budget crisis due to its failure to collect taxes. So if the government could not put the country’s fiscal house in order, Filipinos will continue to live in two parallel universes no matter how the OFWs and call center agents spend their money on appliances, clothes, food, cars and shelter next year.