The charts tell a story….
In the last installment, I wrote about how the Aquino government instilled discipline in public finance by ensuring that the country did not incur more debt that it can pay. In this post where we explore the issue a bit more, I will use the term fiscal discipline to mean discipline in government borrowing, tax collection and spending.
Some people see the conservatism of the Aquino government with its fiscal management as a problem and argue that maybe the government did not spend enough to improve the lot of our countrymen.
Again, we rely on historical charts to tell the real story. The graph above shows us the trend in government spending starting from 1981. By the early 80s, the corruption-ridden Marcos government had already maxed out its borrowings and could not raise any more funds. After the Marcos regime acted like an irresponsible credit card user, subsequent governments had to suffer the consequences trying to get the debt amortizations back to affordable levels – in the process starving the spending for infrastructure. It was only mid-way through the term of Gloria Arroyo that fiscal order was finally restored. As the graph above shows, government spending likewise started rising and continued with the Aquino government.
The Aquino government has been severely criticized for the traffic and the rail transit problems in Metro Manila. The Japanese International Cooperation Agency (JICA) put the cumulative infrastructure deficit up to 2014 for the National Capital Region alone to a total of USD 12 billion or more than a quarter of our annual national budget and almost 90% of our total infrastructure spending. This is the accumulation of the lack of spending in the last 25-30 years. The graph below highlights the particular dearth in spending during the Estrada and early Arroyo years. Any government today will be hard pressed to make the difficult choice of which urgent infrastructure requirement to prioritize – whether it be roads and bridges, transportation, ports and docks, water or power utilities, or irrigation and other agricultural facilities. As it stands the infrastructure spending in 2015 already stood at 3.7% of GDP, the highest since 1991. In 2016, this will reach 5% of GDP. Under the circumstances, it is grossly unfair to condemn the Aquino government for inaction and lack of focus.
Government also needs to ensure that people have jobs and are paid decent wages. This is a tall order especially because we have one of the highest population growth rates in the world. Any government anytime anywhere will find this a daunting task. And yet, the unemployment trend below shows that somehow we are managing to keep unemployment under check – the lowest in 10 years.
Not only are there more jobs, the average wage is also rising steadily. This is exceptional given that the whole world has persistently been in and out of recession for the entire term of President Aquino.
Remarkably, the number of job vacancies is high and continues to rise, albeit at a slower rate (below). This means that our universities are not producing graduates that have the skills that companies require. Government’s effort at introducing the K to 12 program should help but more should be done by the universities themselves – fast. Otherwise, this may become a lost opportunity when more people can, in truth, be employed!
Our reputation in the global community of nations has vastly improved driven by, among other things, the consistent fiscal discipline that the Aquino government has demonstrated. This has led to multiple credit upgrades capped by the achievement of investment grade status in late 2015. This development should lead to even greater levels of capital investment from multinational companies. The chart below shows that Foreign Direct Investment has, on average, been much higher during the Aquino administration. This is a leading indicator or a predictor of the number of jobs that will be created in the future.
Another hallmark of the stellar economic management the Aquino government is the fact that inflation has returned to its historical lows in the late 1950s. This means that the wages that the average Filipino earns has largely been keeping its value.
The improved reputation of the country together with the Department of Tourism’s highly successful It’s More Fun in the Philippines campaign has also translated to ever higher levels of tourist arrivals.
The optimism of businesses in the country never dipped into negative territory. This is because we did not see the persistent boom-bust cycles in our economy during the Aquino administration.
The competitiveness of the Philippine economy compared to other countries has been rising steadily. We now belong in the top 50 most attractive countries for business – for the first time in 10 years. The country is among the eleven countries being seen as the world’s Global Growth Generators or GGGs.
Ironically, the one disappointing record particularly in the light of the government’s vision of Daang Matuwid or The Straight Path is the failure to bring our corruption rank back to the levels during the Ramos administration. That was when the country undertook a bold step at economic liberalization that involved the breakup of corporate monopolies. To put things in perspective, the Aquino administration has made a lot of effort to reduce corruption. It is nevertheless paradoxical that the Aquino administration never pushed hard enough for a key reform as the Freedom of Information Law. We now know that should put more effort into cleaning up the government of crooks since many other countries are also trying to clean up their acts and be a better, more predictable and more transparent host for global business.
The Aquino government has many vocal critics and even the President himself will admit that his government is not perfect. But there is a Silent Majority who can discern the many accomplishments of the outgoing government with objectivity. Hence, his high approval rating even as his term ends. I believe that over time, President Aquino will be recognized as one of the most competent Presidents in our history.
Photo of President Aquino courtesy of the Philippine Star.