8/27/22, 9:40 AM A broader-based economy?

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Aug 27, 2022

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A broader-based economy?
By: Cielito F. Habito - @inquirerdotnet Philippine Daily Inquirer / 05:22 AM September 18, 2018

Are we finally moving away from the “narrow, shallow and hollow”

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Focusing on “narrow,” two particular questions are implied. First, is our

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The quick answer is yes to the first, but no to the second. Let’s examine the
evidence.

In the decade of the 1990s, 97 percent of our GDP growth was driven by
growth in personal consumption expenditures (PCE), fueled prominently by
overseas workers’ remittances to their families. The remaining 3 percent
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8/27/22, 9:40 AM A broader-based economy? | Inquirer Opinion
Investment in 2017 was already nearly half (0.42) of consumer spending.
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This is good news because, from the perspective of economic growth,
spending on investment is more desirable spending compared to the latter.
By definition, it represents expenditures that put in place greater
productive capacity in the economy, unlike PCE, which represents one-off
spending that goes no further. With investment now contributing much
more to overall demand growth, one can rightly say that our economic
growth is broader and its quality has improved, looking from the demand
(expenditures) side.

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The same can be said from the perspective of the supply or production side.
In the decade of the ’90s, services contributed the bulk (65 percent) of the
economy’s output growth, while industry, consisting prominently of
manufacturing, contributed 26 percent. By the succeeding decade, the
growth contribution of services had fallen to 57 percent, while that of
industry had risen to 30 percent. After 2010, the contribution of industry to
growth has risen further to 37 percent.

More industry-driven growth is better quality growth, considering that jobs

in manufacturing tend to be more formal and stable, paying regular wages
and salaries. Services sector jobs, on the other hand, are marked by large
numbers of informal jobs and livelihoods of the self-employed and “pa-
extra-extra” kind (“padyak” and tricycle drivers, fishball or “balut” vendors,
and garbage scavengers are familiar examples). Thus, on the supply side,
our GDP growth is broader and of better quality as well.

Is our economy growing on a more geographically broad base? The not-so-

good news is that the dominance of Metro Manila and its two adjacent
regions of Calabarzon and Central Luzon in overall GDP shares actually
increased over the last two decades. In 1996, Metro Manila (National Capital
Region) accounted for 30 percent of our overall GDP. Ten years later (in
2006), it went up to 33 percent. Another 10 years later (2016) up to last year,
the share further rose to 37 percent. “Imperial Manila” is even more
imperial now!

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NCR, Calabarzon and Central Luzon together made up 53 percent of total
GDP in 1996, 56 percent in 2006, and 63 percent now. The 7-percentage
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8/27/22, 9:40 AM A broader-based economy? | Inquirer Opinion
p p p g
point
Augincrease
27, 2022 since 2006 is more than twice the proportionate increase in
the 10 years preceding that.

The one silver lining here is that, in 2017, all regions of the country grew
positively, with three Mindanao regions growing even faster than the
national average, including the Autonomous Region in Muslim Mindanao,
which grew by 7.3 percent. If that trend holds, then perhaps the widening
dominance of Metro Manila could eventually be moderated in favor of a
geographically broader-based growth of the Philippine economy.

cielito.habito@gmail.com

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TAGS: Cielito F. Habito, economic growth, GDP, No Free Lunch, Philippine

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