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The State of the Nation:

The State of the Nation:. The Economic Perspective. Cielito F. Habito, Ph.D. Columnist, Philippine Daily Inquirer Director, Ateneo Center for Economic Research & Development. Ateneo Center for Economic. Research and Development. What’s the State of the Philippine Economy?.

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The State of the Nation:

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  1. The State of the Nation: The Economic Perspective Cielito F. Habito, Ph.D. Columnist, Philippine Daily Inquirer Director, Ateneo Center for Economic Research & Development

  2. Ateneo Center for Economic Research and Development What’s the State of the Philippine Economy? Of the three key variables that matter most to the common Filipino - prices, jobs, and incomes - all three now show qualified improvement, but the jobs situation remains weak and tentative.

  3. Ateneo Center for Economic Research and Development First Quarter ‘07 Highlights: Strengths • Prices remained stable • Employment shows some (qualified) improvement • GDP grew at a (surprising) record 6.9 percent • Equity, currency markets on bull run

  4. Ateneo Center for Economic Research and Development First Quarter ‘07 Highlights: Threats • Fiscal balance deteriorating • Revenues below target • Deficit exceeding target • Foreign direct investment fell in Jan-Apr 2007 • Export growth has weakened • Imports fell in real terms

  5. Inflation is at a historic low…

  6. …although still higher than most of our neighbors in 2006 Only Indonesia has a worse inflation record

  7. Employment: Improving Picture?

  8. …but the devil is in the details

  9. Profile of the Unemployed • 2.7 million are unemployed under new definition; about 4 million based on old definition, i.e.+ frustrated jobseekers • 6.4 million are underemployed; mostly in agriculture • Of the unemployed: • 80% are within ages 15-35 years • 61% never went beyond high school

  10. RP growth currently slower than most…

  11. What pushed Q1 growth? • Production side: Services • Finance (13.4%) • Real Estate (18.6%) • Communication (10.1%) • Spending side: • Government Consumption (13.1%) • Public Construction (16.9%) • Exports (9.1%) Metro Manila

  12. Bullish Markets, Empty Pockets: Why the “Disconnect”?

  13. Why is it not good news for most Filipinos? • Sectors with broader and poorer base (esp agriculture) grow the least • Fastest growers are low-job sectors • Job generation has been weak and of low quality • Market trends driven more by global forces than by domestic developments • Political & economic power structures continue to bias growth, limit benefits Ateneo Center for Economic Research and Development

  14. Where did growth come from (2006)?

  15. Where did the growth come from?Metro Manila and Surrounding Provinces 55.7% 61.2% Metro Manila

  16. Growth for whom? • Agriculture: 36.7% of workers, but only 8.2% of the growth in Q4 ’06 • Manufacturing & Trading: 45% of GDP growth, but only 28% of workers • The 3 fastest-growing regions (NCR, VI & VII): 62% of GDP growth; only 29% of the jobs • Metro Manila and nearby provinces: 61% of growth, but only 39 percent of the jobs • Growth is still not occurring where jobs are needed most. Metro Manila

  17. The Great Disconnect:Foreign Investments surged last year…

  18. …yet total investments still fell Implication: Domestic investment fell even more sharply

  19. Latest Bad News: Foreign direct investments fell in January-April 2007

  20. ASEAN Investment Growth

  21. ASEAN Investment Growth

  22. Economic Imperatives Foremost Challenge: Spread the benefits of economic growth (more broad-based, job-creating growth)

  23. Economic Imperatives Broad-based growth from: Agriculture & Tourism • Let LGUs row, while DA just steers • Replicate NorMin Veggies story • Foster SME agri-processing • Seize tourism opportunities: surging tourism from China, India, Korea • Ease up on our skies

  24. Economic Imperatives • Ramp up revenue performance • Improve spending quality (more good economics, less politics in budget allocation) • Expand & diversify exports (products and destinations) • Restore domestic investor confidence!

  25. Overarching Imperative:It’s (the) Governance, stupid! • PGMA must convince us that real change is at hand • Quality appointments (tap real talents) • Right policy decisions (greatest good for greatest number) • Shed partisanship & vindictiveness • True & sincere reconciliation, with justice • Political will (is much more than E-VAT) • PGMA can still redeem herself… but does she know how? (Or does she care?)

  26. E-mail: chabito@ateneo.edu

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