THE 6.4-percent slowdown in growth of gross domestic product (GDP) in the first quarter of 2023 underscores the “urgency” of boosting domestic demand and the economy’s supply response to spur inclusive growth, Ibon Foundation Inc. said.
“The continuing deceleration in household spending from low incomes and high prices is among the biggest factors in the slowdown and is among the issues that the administration can immediately address,” Ibon said in a statement on Sunday.
On Thursday, the Philippine Statistics Authority (PSA) said GDP growth reached 6.4 percent, the lowest in eight quarters when GDP growth contracted 3.8 percent in the first quarter of 2021.
PSA data showed GDP growth was at 8 percent in the first quarter of 2022 and 7.1 percent in the fourth quarter of last year.
Ibon pointed out the decline in the household final consumption expenditure (HFCE) for the fourth consecutive quarter at 6.3 percent in the first quarter of 2023, which the group said is already 3.7 percentage points slower than the 10-percent rate upon “economic reopening” in the first quarter of 2022.
With this, Ibon said it is a clear sign that the purchasing power of families is “failing from soaring prices, low wages and earnings, and worsening informality and joblessness.”
This now gives rise, Ibon said, to the “urgency of substantial wage hikes and emergency cash assistance (ayuda) to increase household consumption and welfare, which will at the same time boost aggregate demand as an engine of growth.”
Another factor that dampens domestic demand, Ibon noted, is the jobless growth in certain industries and informality.
“Sub-sectors where employment declined despite reported growth include: human health and social work activities which grew by 7.5 percent yet saw employment decline 11.1 percent [79,000 less workers]; manufacturing which grew 2 percent, but employment declined 1.3 percent [46,000 less workers]; and construction which grew 10.8 percent, but employment declined 0.4 percent [18,000 less workers],” the group stressed.
The group noted similar trends in information and communication, and financial and insurance activities.
Ibon also pointed out that “The number of informal and part-time workers with likely low and erratic incomes also grew.”
In fact, it noted, “Between the first quarter of 2022 and first quarter 2023, informality swelled by 10.4 percent or 1.97 million workers [from 18.9 million to 20.8 million], while the number of part-time workers grew by 14.6 percent or 2.1 million workers [from 14.6 million to 16.8 million].”
‘Misplaced reliance’
With this, Ibon warned against the government’s “misplaced reliance” on exports and foreign investment as sources of growth as the global economy weakens and the likelihood of a global recession increases.
The group said the government’s focus should be on domestic demand-driven growth amid growing global uncertainty and volatility.
Meanwhile, to better utilize the P5.3-trillion national budget for 2023, Ibon said “spending needs to be shifted away from capital-intensive import-dependent infrastructure spending, addressing corruption and pork barrel leakages, and containing bloating debt servicing.”
Instead, it noted, “more attention needs to be given to items that more directly improve family welfare and have more domestic multiplier effects such as ayuda, wage subsidies, production support for farmers, fisherfolk and small enterprises, and social services.”
The group said these fiscal realignments can be complemented by implementing a “long-awaited and justified” wage hike.
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