Whither growth?
According to Deepali Bhargava, ING Economics’ regional head of research for Asia Pacific, the first-quarter performance was a significant disappointment.
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According to Deepali Bhargava, ING Economics’ regional head of research for Asia Pacific, the first-quarter performance was a significant disappointment.
Economists had warned that the government’s gross lethargy in implementing budget reforms would stifle the growth momentum. Then the Middle East crisis happened, and the Philippines is now among the first in the region to enter a slow-growth, high-inflation era.
The textbook definition of stagflation is a rare and problematic economic condition characterized by the simultaneous occurrence of slow or no economic growth accompanied by high unemployment and soaring inflation.
The factors for sinking into the new scourge have been evident, with gross domestic product (GDP) growth receding to 2.8 percent in the first quarter, while inflation rocketed to 7.2 percent in April.
The growth skid was the worst since 2021 when the pandemic caused global devastation and prices have never been higher since 2023.
According to Deepali Bhargava, ING Economics’ regional head of research for Asia Pacific, the first-quarter performance was a significant disappointment.
The economy is being sustained mostly by consumer spending, with anemic government spending support.
“Private consumption accounted for roughly 80 percent of total GDP growth, underscoring how significantly weaker other growth components were,” Bhargava said.
Independent think tank Ibon Foundation describes the economic deterioration as “all-fronted,” which “tens of millions of Filipinos already feel every day.”
Inflation tripled within two months, some 357,000 jobs were lost between February and March, and the economic momentum is now on the downside.
“Rapidly rising prices, worsening joblessness, and slowing growth are a clear stagflationary pattern,” Ibon said.
The Marcos administration is using the Middle East crisis as a convenient excuse, but the slowdown and high prices are mostly due to its refusal to cut oil taxes, stop oil firms from overpricing, freeze the prices of basic commodities and provide immediate relief to the marginalized.
In a recent episode of Straight Talk, the DAILY TRIBUNE’s online public affairs program, Ibon executive director Sonny Africa said the slowing growth trajectory began in 2017 but was temporarily masked by the pandemic-induced collapse and rebound.
Corruption scandals last year and the oil shock this year exacerbated the erosion of growth.
The key response to the crisis of rising prices, the Unified Package for Livelihoods, Industry, Food and Transport, benefited barely 10 percent of the over 14 million self-rated poor families before the oil shock. In effect, most transport workers, fisherfolk, farmers and low income households who bear the impact of the worsening situation suffer from neglect.
Africa said the excessive knee-jerk monetary tightening by the Bangko Sentral ng Pilipinas will only serve to dampen growth and employment while doing little to counter the high oil shock-driven prices.
Household consumption, which accounts for 73 percent of aggregate demand, and the fate of micro, small, and medium enterprises are at risk due to the rising cost of living.
Performative measures, such as cash dole-outs, indicate the leadership lacks a long-term plan to stabilize the economy.
Ordinary Filipinos are being left to fend for themselves as they carry the burdens of inflation, jobs loss, and the shock of slower growth.
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