LEGAZPI CITY, 31May2013 – Government economic managers are elated over the 7.8% GDP growth, but they should realize that similar to previous election years, this quarter’s growth is largely brought about by election-related spending.
According to research group IBON, the GDP growth is momentary, unsustainable and felt only by a very few. In fact, growth is likely to return to trend rates and slow down in the remainder of the year.
The last three election years saw a noticeable uptick in year-on-year GDP growth in the first and second quarters from the quarters immediately preceding these. The first quarter GDP growth rates during the 2004 presidential elections was 7.3%, in 2007 mid-term elections was 6.3% and 2010 presidential elections was 8.4% — these were all among the highest recorded since at least the mid-1990s. But these were all short-lived, and GDP growth in the immediately after the second quarter consistently falls by some 1.5 to 3 percentage points.
While election spending boosts aggregate figures, gains are narrowly concentrated in a few campaign-related sectors. These are mainly service sectors such as media, transport and communications, hotels and restaurant, and trade – these sectors have weak income and employment multiplier effects. But in terms of production, growth is not broad-based. For instance, marginal sections of manufacturing have benefited from spending on election paraphernalia, food and sundries.
Aside from election spending, the GDP grew due to increased government expenditure. According to IBON, this presents an important juncture of Philippine economics, where government spending is at the forefront of driving economic growth yet the benefits are not directed to the majority, but to a few investors. National government expenditures increased by Php35.9 billion or 9.1% increase in the first quarter of 2013 from Php394.9 billion in January-March 2012 to Php430.8 billion in the same period this year. Even construction was driven by government spending for public construction, which registered a double-digit growth of 45.6 percent. In the first quarter 2013, government spent Php29.7 billion for public construction, which increased from Php20.4 billion for the same period last year.
Despite the government’s elation over the latest GDP figures, there is no sign that Philippine economic growth has broken its pattern of being slow, said the research group. More importantly, there is no sign that economic growth has become any less exclusionary, as government’s own data on poor jobs performance, unchanged poverty situation and severe inequality shows.