When the official GDP growth of 1% for the first six months was announced a few days ago, the news was greeted with exuberance by some government functionaries, caution by analysts and a healthy dose of skepticism by civil society organizations.

Members of the government economic team expressed optimism that the drastically revised growth targets of 0.8-1.8% will be attained, especially with aggressive infrastructure spending and accelerated election expenditures. The assumption was that the Philippines will prosper along with the global economy which is predicted to recover next year.

Other analysts were not as ecstatic. Economist Ben Diokno cited the concern of the Deutsche Bank Group about a “triple U recovery” wherein there will be “three bumps” or downward plunges before the global economy finally recovers in 2011. Still others warned that the Philippines has persistent domestic problems which might affect recovery.

Civil society organizations continue to be skeptical . For them the level of GDP growth has to be sufficient to impact on the worsening problems of poverty and income distribution. They remind us that even at 7% GDP growth in 2007, poverty levels and hunger continued to rise.

Growth must be sustained and not plummet up and down. They continue to warn against the real possibility of a fiscal crisis after massive election spending in 2009 and 2010.

Is a 1.0% GDP growth sufficient for Filipinos? For many Filipinos, the more important question to ask is whether this much touted GDP growth will reach them and grant them relief from poverty and hunger.

A few days after the president announced in her SONA speech that self-rated poverty has gone down to 47%, the Social Weather stations released its latest survey showing that more than 50% of Filipinos rated themselves poor. The same survey also indicated more than 20% level of hunger. Can this wonderful GDP growth overtake the acceleration of poverty and hunger?

Our levels of population growth remain among the highest in Asia. Can the modest growth in the economy catch up with the immodest rate at which our population is growing? For as long as our population is growing much faster than our economy, a humble 1% growth will not be enough.

Who are benefiting from the increase in the GDP?

The NSCB has reported that the modest growth is accounted for by construction and mining and quarrying sectors, and government services (largely infrastructure).The bad news is that the manufacturing sector continues to contract even as the trade sector remains weak. Manufacturing and trade are among the biggest sources of employment.

While the DPWH accounts for the largest increase in the 2009 budget due to infrastructure, it is also among the most vulnerable to what public administration experts describe as “deviant bureaucratic behavior.” Such kinds of expenditures tend to be related to election objectives.

The danger is that the benefits of modest growth are concentrated in certain sectors and may not necessarily reach areas where poverty is more prevalent.

Election spending and economic recovery

It is said that election spending will also spur economic recovery. This might be true to a certain extent. However, it must be remembered that massive election expenditures will largely benefit the communications and information practitioners , TV and radio stations, as well as producers of election paraphernalia. The biggest beneficiaries will be the politicians themselves. Of course it can be said that such largesse will create jobs, purchasing power, and increase demand.

The problem with election spending is that it is not sustainable . We all know that elections in the Philippines are characterized by huge deficits which can trigger fiscal crises in the ensuing years.

Domestic threats

Optimists claim that unlike other countries, the Philippines is not affected by the global economic crisis. The buzzword is that our economy is “decoupled” from the international economic system. Now that the global economy is seen as recovering, the claim is that our economy will recover as well! Strange, but convenient logic.

The threat emanating from the escalating deficit is real. As of July, 2009 it stood at over Ph180 billion . It is projected to reach Ph250 billion by year end. Analysts say it could be more. As a student of public fiscal administration, I agree that government has to resort to deficit spending to stimulate the economy. However, the level of growth must parallel the level of spending.

While waiting for the Year of Recovery to finally descend on the Philippines, poverty is escalating, hunger is rising and social discontent is simmering.

After 2010 what?

Much hope is pinned on the stimulus of election spending. After 2010 when the deficit has reached its limit, when public resources are depleted, when social problems spin out of control, and when we get the same kind of political leaders, what happens next?