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Filipinos Divided on Economic Diagnosis : While Aquino Points to Growth, Others Say Consumer-Led Gains Are Illusory, Fear Birth Rate Will Add to Joblessness

August 22, 1988|From the Washington Post

MANILA — President Corazon Aquino, in her state-of-the-union speech last month, hailed economic recovery as one of the principal accomplishments of her 2 1/2-year-old government: "The economy has taken off. The economic indicators show it. The general feeling confirms it."

Yet despite some recent favorable trends--including a 5.7% increase in the gross national product last year--many economists, diplomats and Philippine politicians are concerned that the growth is illusory and that unemployment is already a problem and will intensify because of the spiraling birth rate.

"What we have today is an artificial growth in the economy," said Sen. Teofisto Guingona. "It is fueled not by real production but by inordinate imports."

'False-Front Economy'

He said the policy of import liberalization has led this cash-strapped country to spend badly needed foreign exchange on "luxuries, like jewelry and apples."

Consumer buying is clearly up, with many Filipinos spending more money on air conditioners, refrigerators and other expensive household items. Shopping centers are packed with weekend buyers. New restaurants, clubs and discos appear to be opening every week.

The skeptics argue, however, that this consumer-led growth--centered mainly in Manila and a few other large urban areas--is benefiting only the small middle and upper classes, who already had money to spend.

"The same people who benefited under (deposed President Ferdinand) Marcos are benefiting today," said a Western diplomat. "For the lowest-level peasant, his life is not that different from what it was four years ago. I call this the false-front economy--it's very frail."

The consumer spending has been fueled by recent salary increases for government workers and by higher prices for Philippine exports, particularly coconut oil and sugar. Analysts said the "boom" is artificial because the world prices for those products could drop and because the government is already engaged in deficit spending to pay for the pay increases.

60 Million and Growing

Another pessimistic economic assessment came to light this month with the leak of a confidential draft report that was prepared by the World Bank. The report said that even if the economy continued to grow by 6% a year until 2000, real wages would still be 3% lower than they are now because of the birth rate. The population of about 60 million is growing by about 1.5 million every year.

The World Bank study, titled "The Philippine Poor: What Is to Be Done?," was first reported upon in the Far Eastern Economic Review.

"Even with fairly rapid and sustained growth over the next decade, it will be difficult for the growth in employment to keep pace with the rapid growth in the labor force," the report says. "Even with high growth, real wages are likely to decline and poverty worsen."

The bank concludes that no economic recovery program will work until action is taken to curb what is one of the world's highest birth rates.

Any nationwide population planning policy, however, is likely to be opposed by the powerful Roman Catholic Church. Aquino, when asked about birth control, has said only that people should be made aware of all their options.

While other Southeast Asian countries have prospered by following the classic export-led growth strategy--Thailand, for example, is poised to become the next so-called newly industrializing country--the Philippines has seen real incomes shrink. The country has a $28-billion foreign debt.

While the GNP has continued to expand this year, growing at a 7.6% annual rate for the first quarter, the all-important agricultural sector has stalled. Recent government figures show that output of most major crops in the first quarter of this year dropped 3.4%, compared to the same period last year.

Slow Foreign Investment

The agricultural sector is considered politically important because rural areas, where 70% of the population lives, are still the main breeding ground of a tenacious Communist insurgency.

"Increasing rural incomes and rural development are crucial not only for our economy, but for national security," Sen. Vicente Paterno said on the senate floor.

Another economic trouble spot is investment. Domestic investment has increased significantly, and some foreign investment has come from Taiwan and Hong Kong. But so far, the hoped-for infusion from the United States and Western Europe has failed to materialize.

Bernardo M. Villegas, senior vice president of the Center for Research and Communication, blamed the slow foreign investment on the country's "bad press."

In his most recent, optimistic, economic report, Villegas said that Western investors "have set their sights on the country--but not without caution. Many of them still think that Manila is Southeast Asia's Beirut, so they're not all that keen about investing massively here."

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