"More than ever for this election, people may just vote with their gut."
"More than ever for this election, people may just vote with their gut."
Amid the official arrival of the political circus—the week-long filing of certificates of candidacy for the 2019 elections began on Thursday—the latest survey by the Social Weather Stations painted what should be a sobering picture for all those gunning for elective positions in government.
According to SWS, Filipino families who consider themselves poor increased by 1.1 million over the last quarter, from 11.1 million to 12.2 million between June and September. The highest in four years, the 4-percent jump also means that self-rated poverty incidence—at 52 percent—now afflicts a majority of Filipinos.
It is little surprise that the near-decade-high inflation, in particular the surging cost of food, has been singled out as the culprit. On the back of successive record highs, 8 percent of those surveyed consider themselves “newly poor,” or those who rated themselves not poor one to four years ago.
Another important finding is the significant rise in self-rated poverty in Luzon outside Metro Manila (12 percent) and Mindanao (5 percent). While unchanged, the 67-percent rating in the Visayas is the highest in the country. Perhaps the only good result is the 17-percent drop in Metro Manila, which may mean that residents are starting to feel the impact of government interventions.
Many groups are rightly quick to lay the sobering statistics at the feet of the Duterte administration. After all, Duterte and his men had run a campaign built on massive grassroots support and a supposedly pro-poor stance. It also represents a stinging repudiation of some pronouncements by the government’s economic managers that insensitively downplay the impact of inflation as insignificant.
For its part, Malacañang said it “understood the people’s sentiment,” and assured the public that measures had been put in place “to cushion the impact of inflation and bring food on the table of poor families.” Former Presidential Spokesperson Harry Roque said it was “the order and desire” of President Duterte that “no Filipino family should be hungry.”
That’s well and good. But if the self-rated poverty figures represent immediate sentiments of people on the ground, things in the macroeconomic horizon are not looking good either. Foreign think tank Capital Economics predicts the record-high inflation—and its impact on consumer spending—to slow down the country’s economic growth to 6 percent next year, well below the government’s targets.
“Higher oil prices, a weaker peso, and disruption to food supplies from Typhoon ‘‘Mangkhut’’ [Ompong] mean inflation is likely to remain above the central bank’s target until late 2019,” the group said.
In addition, as the Bangko Sentral ng Pilipinas has been forced to raise its key interest by a total of 150 basis points to stave off inflation, industry pundits say the move will also contribute to lower-than-expected GDP numbers. The export sector is also seen to suffer from an expected ease in external demand, even as imports continue to boom, thanks to the government’s infrastructure campaign, consequently widening the trade deficit and putting additional pressure on the peso.
In fact, data from the Philippine Statistics Authority revealed a ballooning trade gap for the first eight months of the year at $26 billion, a far cry from the $15.7 billion in the same period last year. The deficit is seen to far exceed overseas Filipino cash remittances.
“We expect the peso to fall to P58 against the US dollar by the end of next year,” Capital Economics said. “A weak currency is a concern for the authorities because of the upward pressure it will put on import prices.”
In many ways then, the combination of internal and external factors is seen to create a perfect storm of easing momentum for the Philippine economy. And while the government might be doing something to cushion the impact of inflation—rice tarriffication, reforms in food policy, fuel tax suspension, and other social mitigation measures—the same can’t be said for some of its key policy directions that could impact more people in the long term.
For instance, on the heels of the deleterious impact on inflation of the Tax Reform for Acceleration and Inclusion Law comes the Tax Reform for Attracting Better and High-quality Opportunities or TRABAHO bill, the second phase of the government’s tax reform package. In addition to industry players, the Philippine Economic Zone Authority had been clear in its opposition of the proposed measure, citing a projected P298-billion loss in revenues for domestic businesses.
If enacted, the TRABAHO law will reduce corporate income tax but also rationalize tax incentives, key features that local firms find appealing. But PEZA Director General Charito Plaza warned that local companies are also bound to lose business as economic zone locators conduct a lot of business with domestic suppliers.
“If our exporters will put out, affected will be our domestic suppliers. For example, the zero VAT for local purchases incentive of our exports—how much local purchases did our industries in PEZA purchase from local businessmen, from local suppliers?” Plaza said.
The measure could thus spell disaster for the already weakening export sector, not to mention further impair the country’s already subpar competitiveness in the region. All in all, stagnant investment in key industries and even capital flight do not bode well for the economy, possibly starting a cycle of slow growth.
And while all these are happening, it’s the ordinary Filipinos who have no choice but to suffer in the meantime. These economic issues, while perhaps abstract to some, are deeply felt by the most marginalized sectors of society. The biggest threat to this administration then may not be political at all, not some covert ouster plot by a conspiracy among its enemies. The biggest risk may be the grumbling of millions of stomachs and the recession of a once-robust economy.
Less than a year before the 2019 mid-term elections, the people, more than ever, can be expected to cast their votes based on their gut.