February 08, 2004

The Philippine STAR, Opinion Page

Reality Check

By Babe Romualdez

Every election time, there are the surveys.  It's a useful tool to know where we stand as a nation, how things are moving along in the socio-political and economic arena, who is gaining among the candidates, etc.  But the surveys today are being defined by the present demographics, which is obviously, lopsided.

The Philippines has now grown to 84 million people--AB, 1 percent or 840,000; C, 9 percent or 7,560,000; D, 55 percent or 46,200,000; and E is 35 percent or 29,400,000.  By 2010, this would reach 100 million.  The wealth of the AB class seems to have dissipated over the years.  The middle class is literally thinning out while the D and E brackets are growing daily.

This is the main reason why the lower bracket continues to take the upper hand in the surveys.  This is the reality today.  

If knowledge is power, then it's important that we have a realistic view of the social, political and economic landscape.  Surveys can help provide the information that will make us objective, but less when the demographics tips to one side only.  The bigger hurdle is that the D-E are not as knowledgeable about the country's problems as the A-B.  When this ignorance dictates the outcome of a survey, the result can be misleading.

One thing is clear though, solving the problems of this country is not as simple as untying a shoelace.  The problems are not only many, but complicated.  Those who want to lead this country must have a realistic view of what the problems are, or else they would end up biting more than they could chew.

The reality is as follows: Unemployment grew by 11.4 percent last year, adding roughly 58,000 to the total list of jobless Filipinos, which is 3.93 million.  That's more than the total population of some cities in metro Manila.  Even if it were true that one million jobs were created by government last year, it can only provide livelihood to a very small chunk of the D-E population.

If Congress "reenacts" the 2003 budget instead of approving the 2004 bill, public education will suffer the loss of four billion pesos in additional resources, making it difficult for the DepEd to build additional public school buildings and classrooms; give salaries to teachers; provide operating and maintenance expenses, etc.  For the long term, educational standards will suffer tremendously, and will obviously worsen the unemployment rate.

On the subject of the national budget, the 2004 budget deficit forecast may climb to P230 billion (US$4.1 billion), higher than what was previously assessed at P197.8 billion.  This simply means the BIR must collect an additional P488.6 billion this year to balance off the deficit.  But even if the bureau can pull-off a 100 percent collection rate, only 8,400,000 can pay their taxes.  This is not enough. 

The deficit will provoke two thing to happen: Inflation, as predicted by the Bangko Sentral ng Pilipinas, and the sharp drop of the peso.  Just this week, the peso almost hit P57 to the US dollar.

By the end of the year, or the election period, it might hit the P60 mark.  Trading companies that rely on foreign exchange would be the hardest hit.  In fact, they are now paying an additional five-peso risk premium because of political uncertainties.  With every drop of the peso, the country's foreign debt payments rise by P3.375 billion each year.  That's why P182.3 billion of the 542.5 billion that's allotted for debt expenditure this year will go to the payment for interest and amortization alone.  If it reaches P57 to $1, debt payments would reach P10.124 billion--equal to the budget of the Department of Health.

If this downward trend continues, our economy will go the way of Argentina in two years as predicted by the Standard Chartered Bank.  It is clear that whoever becomes president will have a tremendous burden and challenge on his or her shoulders.  However, many economic analysts believe the problems can still be solved.  It's still possible to build a stronger and more stable middle class that would support the government's revenue base.

We cannot depend on OFW remittances forever.  Rather, we can enhance on the government's tax collection system once the middle class has widened.  China today is an economic powerhouse because of its large middle class.  For this country to move forward, it must have credible elections so we can have some form of stability.  No-election scenario and military juntas are not the answers.  In fact, this could probably be the last nail on the country's coffin if the people behind these plots continue.

After EDSA Dos, we have no other choice but to get back on track and strengthen the democratic system.  More importantly, there must be a unified effort to support whoever wins this coming May.  Divine grace is important, heroism in the movies is inspiring.  But it would take more than that to solve the problems of this country.  This is the reality we must all face today.

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