ON Monday, July 22, 2019, the President will give his fourth State of the Nation Address. He will give this Sona under the backdrop of unprecedented popularity. Both the Social Weather Station (SWS) and Pulse Asia recorded more than 80-percent approval rating for the President. Critics of the administration were surprised with these historic high trust ratings of the President considering that these surveys were conducted after the Recto Bank incident. This followed the landslide victory of the senators and most congressional and local candidates endorsed by the President.
While the first-quarter growth performance of the economy was moderate, our own analysis in the Ateneo Center for Economic Research and Development (ACERD) shows that the prospects of sustaining a relatively high trajectory in the next three years remains strong, as long as the infrastructure program stays on track.
The broader economic numbers such as GDP, nonetheless, are not the main source of the President’s popularity. It is actually the day-to-day economics where the performance of this controversial administration has been palpable.
Despite all the issues and controversies in the political arena (human-rights violations, weakening of democratic institutions and the rule of law), the broader and the day-to-day economy seem to be shielded from such controversies. There seems to be a firewall (which we previously described in a column) that continues to exist between the political and economic arenas.
It also helped that the President has given his economic team some autonomy to do what they needed to do. The economic managers were able to bring and sustain the economy on course because there was not much deviation from the basic macroeconomic policies of the previous administrations of Arroyo and Aquino.
Consider how the sustained economic growth and the accompanying improvements though modest in the poverty levels and the labor market of the country. Poverty among Filipino families has gone down by 6.1 percent from 2015 to 2018 (using the first half statistics). The official unemployment rate is currently near 5 percent while the underemployment rate is at the 15-percent to 16- percent level. This means that both the quantity and quality of employment has become better in the last three years.
But beyond the big numbers, these improvements have been translated into the basic household budgets of the ordinary Filipino family. The passage of the free public education up to college level has freed education resources for the children. The increase in SSS pension has relieved the medicine requirements of the grandparents. The first package of the Tax Reform for Acceleration and Inclusion (TRAIN) law removed the income tax burden of the parents (earning up to P21,000/month).
Recently, a new law exempting payment of fees for first-time jobseekers was also passed. The result is a significant increase in purchasing power for the ordinary family. For those who are in the lower levels of income bordering poverty and below, the administration has passed the Universal Health Care law that will address the increasing out of pocket health expenditures of the people. It also institutionalized the Conditional Cash Transfer program by passing the Pantawid Pamilyang Pilipino Program (4Ps) ensuring the future human capital of the country by investing in basic health and education. To top it all, the administration was able to address the decade-high inflation in 2018 in less than a year, bringing inflation back within the government target of 2-4 percent.
This improvement in the day-to-day economics is validated by our colleague, Dr. Edsel Beja, who developed and computed a misery index composed primarily of data from PSA and SWS (it was in this column also in 2014). His latest computations revealed that across administrations, the index improved considerably under President Duterte.
Beyond the day-to-day economy, the government has also been able to pass difficult economic and relevant reforms in a quick manner such as: first package of TRAIN, the Ease of Doing Business and Amendments to Arta law; the Agricultural Free Patent Reform Act, the rice tariffication law that helped ease inflation, Maternity Leave extension, implementation of RH law, establishment of the BARMM, Magna Carta for scientists, engineers, researchers, and other science and technology workers and Balik Scientist law.
It also completed rehabilitation of the following airports: Cagayan, Bohol, Mactan and Puerto Princesa; ongoing at Clark, Aklan, General Santos, Bicol, Iloilo, Davao, Laoag and Zamboanga. Successful rehabilitation of Boracay and the ongoing work at Manila Bay. It has shown political will in making these things happen.
There are, however, still pressing economic issues that need to be addressed. Poverty incidence, while improved, is still double digit and in absolute numbers, there are still millions of indigent Filipinos. Inequality at various levels (household, regional) remains high. This means giving priority to agricultural production beyond rice as a key economic strategy as the poorest sector remains to be those working in agriculture. Corruption remains high, especially in notorious revenue-generating agencies despite the verbal assurance of the President that he will fire officials of such agencies.
There are also some constraints and challenges ahead. The clamor to push through with federalism, which can create a fiscal challenge that can disrupt the sustained growth of the economy. The ongoing US-China trade war which is impacting our export industries involved in the global value chain. And last, the challenge of new technologies and artificial intelligence, and how we will be able to prepare for their impact, especially on the labor market. We expect the President to explain his strategy in addressing these challenges during the Sona.
Fernando T. Aldaba is professor of Economics and dean, ADMU School of Social Sciences. Alvin Ang is professor of Economics and ACERD director.
Image credits: AP/Eugene Hoshiko