Post-SONA analysis: A curious fighting stance

The State of the Nation Address, by tradition, is usually delivered before a joint session of both chambers of Congress in an inspiring manner so as to round up a consensus and active support for the President’s plans. It is a key measure of a chief executive’s ability at unifying disparate forces toward nation-building. President Gloria Macapagal Arroyo’s SONA this week missed those twin objectives. Many of the achievements she claimed were quickly challenged by economists, academics, independent politicians and business people. And what about her description of what’s next for the nation? While her vocal allies say that the government’s future directions were clearly laid down in her speech, others could only try to decipher what she meant to say. Reading tea leaves would have been easier. Instead of a unifying and inspiring tone, the speech sounded very much like coming from somebody who got up on the wrong side of the bed on that rainy Monday. Arroyo incessantly – perhaps unnecessarily – harangued various individuals or groups whom she referred to collectively as her “critics". Perhaps somebody on her staff forgot to remind the President that it was her “critics" who gave her not a few important and timely ideas on how to approach her government’s fiscal and debt problems in 2004 – just a few months after she got reelected in the May 2004 election (yes, the same one made infamous by the “Hello Garci" episode). In the midst of then worsening deficits and public indebtedness, a group of professors at the University of the Philippines School of Economics made public their assessment of the dangerous situation and outlined a prescription to both stop the deterioration and put the economy on a growth track. Does anyone still remember the recommendations of those “critics" at UPSE? They included radical measures in lieu of the narrow-minded strategies—spending cuts, tax administration reforms, or even printing money to cover the increased government debt—that were being considered at the time. The UPSE economics professors called on the Arroyo government to look at a package of measures which, although potentially politically unpalatable, were “not only effective but also just." Many of those recommendations eventually became policies that yielded positive results for the economy and the Arroyo administration. Arroyo has often labeled as “critics" the survey groups that periodically probe into the national pulse. Recent surveys have confirmed widespread incidence of poverty and hunger. There was a tinge of contempt when Arroyo referred to the problem of hunger—“dumarami na naman daw ang pamilyang nagugutom"—but still she asked Congress for new support for her administration’s Hunger Mitigation Program, a comprehensive scheme at targeting increased food production and improving people’s capacity to “obtain sufficient food." The program is now on its third year. A lot of the gains that Arroyo listed in her SONA were really the fruits of her remarkable work ethic. Even her worst critics will probably express only admiration for the long hours she puts on the job, not just in the office but in the field as well. Still, the SONA could have suffered a truncated credibility from the omission of certain facts related to the achievements cited. Foremost among these is the quality of the economic growth that Arroyo celebrated in her speech as “uninterrupted growth for 33 quarters." She also cited increased investments, jobs, tourist arrivals, and an improving credit rating for the country. Unfortunately, the economy continues to be vulnerable to external forces over which the Arroyo government has no control. Foreign trade remains a weak cog in this recent economic growth, and prospects of prolonged weak demand for exports will continue to dampen domestic demand. Under that situation, local industries cannot possibly plan for increased production that will create jobs for the people. The Philippine economy gets its sustenance from remittances from overseas Filipino workers (OFWs), who are expected to send home around $16 billion this year. These remittances fuel the consumer spending that supports a wide range of industries, mostly retail consumer goods and some sections of the property sector. On the other hand, the government is now getting increased finances from its borrowings as tax revenues perform badly. The gap between government revenues and spending continues to grow, and some estimates point to a shortfall of up to P400 billion for the entire year. The peso equivalent of this year’s OFW remittances can be expected to exceed total tax collections of the Bureau of Internal Revenue. Arroyo’s SONA also failed to describe more recent trends in the performance of the economy. For the first quarter, gross domestic product (GDP) inched up by a mere 0.4 percent. In fact, that growth was partly the result of revisions of data for the comparable period in 2008 that lowered GDP level for that period. If there was no data revision at all, the first quarter 2009 would have shown a GDP decline of 0.9 percent. The National Statistical Coordination Board usually revises National Accounts data when late information submissions from some government agencies arrive. But whether the economy is on a slower growth or in a contraction, what is clear is that this level of performance already means some sectors of the economy are now at the losing end. Arroyo’s SONA missed a chance to assure these sectors that better times are just ahead. The people remain in the dark as to what options are available to them while the economy tries to weather the global crisis. While the SONA failed to meet expectations of a clear roadmap for economic recovery in the coming year, there was a curious fighting stance that Arroyo conveyed to the political opposition. By repeatedly attacking the political opposition, Arroyo succeeded in making the SONA sound like a campaign speech. It will truly be a pity if the next few months are spent more on divisive politicking at the expense of the economy. Ping Galang is a veteran economics journalist.