A disturbing lack of realism in economic targets

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IT seems a few eyebrows were raised earlier this week when the Department of Trade and Industry (DTI) announced an export growth target range for this year of between 6.6 percent and 8.8 percent, and immediately followed up that piece of news with an opinion that exports would “go beyond forecasted figures,” and expand by as much as nine percent.

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This would not have seemed so unrealistic, had the forecast not been made within days of the final report on 2015 export figures, which showed an overall decline of 2.4 percent from the year before. Nor would the DTI figures have seemed so out of place had they not come after a downward adjustment in targets by the interagency Development Budget Coordinating Committee (DBCC), which trimmed the export growth goal to five percent from an earlier target of six percent for 2016.

Our own and other economic analysts have confirmed what we suspect: The DBCC target is likely much closer to reality, and there is virtually no chance, given that this is an election year and given the general global uncertainty, that Philippine export growth could even come close to the DTI’s high-flying aspirations.

We do not need to be reminded that for the nearly six years the Aquino Administration has been in office, instances in which the government has not grossly overestimated potential economic performance have been extremely rare. Excessive optimism is one of the few areas in which the government under President BS Aquino 3rd has been surprisingly consistent; no matter whether the subject is export performance, tax collections, customs duties, GDP growth, foreign direct investments, or virtually any other economic indicator, government planners have habitually set goals that are far above what has been realistically achievable, with the least harmful of the eventual consequences being that they simply appear to have no idea what they’re doing.

Certainly, we have expressed grave doubts about the competence of a wide variety of government officials and agencies, but we do not, for the record, believe that the entire government apparatus is comprehensively stupid. What seems to be happening instead is that too much attention is being paid to creating the appearance of glowing performance by setting bold, attention-grabbing targets, regardless of whether or not they are at all realistic; the target, after all, is the first news the public will hear, and there will always be a certain segment of the public audience that will assume, because the news is coming from authoritative government sources, that the target is a valid description of the country’s current state.

Obviously that is not the case at all, and the harm that the constant discrepancies between targets and actual results can cause is not at all limited to mere contradictions. Revenue targets, export targets, GDP growth targets, and other indicators are guides to investors and business owners, who plan for the future based on the information made available to them. If that information is incorrect, it can have dire consequences. An exporter, for example, who invests in expansion based on a false expectation of a nine percent growth in exports will find himself with excess capacity and perhaps even debts and workers who cannot be kept employed if actual export performance falls far short of the target.

Accuracy, perhaps even a bit of conservative caution, is far more useful and far more credible than bold optimism, and especially when it involves real financial resources and livelihoods.

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