To be a successful macroeconomic analyst, you need just four things: The first is access to a telephone. The second is the phone number of someone in press relations at Malacañang or the office of Bangko Sentral ng Pilipinas (BSP) Governor Armando Tetangco Jr.
The third is a pen. And the fourth is a notepad or sheet of paper, so you can use that pen to write down whatever the person on the other end of the phone conversation tells you, which you will then report to the media as your own critical, in-depth analysis and economic forecast.
That is apparently what the London-based “economic research consultancy” Global Economics did earlier this week, joining a long line of financial luminaries like Moody’s Analytics, Mizuho Bank and Ernst and Young in parroting the same tired collection of positive-sounding irrelevancies recited for the last two years by the Aquino administration to draw the conclusion that the Philippine economy is “in a sweet spot.” According to Global Economics’ interpretation of what they were told by Philippine government image managers, there are five reasons for the “sweet spot”: A large current account surplus and large foreign currency reserves; a decline in the debt-to-GDP ratio to below 50 percent; a beneficial demographic profile which provides a large workforce; institutional and political reforms undertaken by the Aquino administration; and finally, encouragement of development in the manufacturing sector.
If economic forecasting for this country was any more self-referential, it would go beyond turning itself inside-out and become a Klein bottle. Of the five points BSP talking points repeated by Global Economics, the only ones that are actually true are the first two; the Philippines does have a positive current account balance, large foreign reserves, and a debt-to-GDP ratio of only around 40 percent. The other factors are dubious at best. BSP’s Tetangco has been repeating the line about the Philippines “reaching the economic-demographic dividend in 2015” since the middle of last year, but in November an analysis conducted by the National Economic and Development Authority and the University of the Philippines revealed that the current fertility rate—3.2 children per woman—is simply too high for that to even be remotely possible. Their conclusion was that with a family planning program (presumably the stalled Reproductive Health Act, although that was not explicitly identified), the fertility rate could be reduced to the sustainable level of 2.1 children per woman by 2020 or 2025; without family planning and assuming the current population trends continue, the fertility rate would likely decline on its own to 2.1 by around 2030.
The final two points, which anyone who was actually here and not sitting in an office in London would instantly recognize as stale, four-year-old leftovers from President B.S. Aquino’s election campaign, are ridiculous to the point of being contemptible, particularly in light of events in recent weeks. Overall perceptions that corruption has worsened during President Aquino’s term are certainly not indicative of “reform,” and the areas in which scandals have erupted should be particularly worrisome to any economic analyst: Serious questions of both the legality and financial effectiveness of lump-sum spending programs, allegations that considerable amounts of aid for disaster relief have simply vanished—a suspicion that the faltering pace of the recovery (the Wall Street Journal reported earlier this week that five dead bodies a day are still being found in and around Tacloban, three months after Typhoon Yolanda) simply reinforces—and a quantum increase in smuggling in the past three years. And building a framework to encourage manufacturing is not at all helped by a major crisis over electric rates, procedural troubles in key infrastructure projects like the Cebu-Mactan airport or the acquisition of new rolling stock for Manila’s dilapidated Metro Rail Tranist-3 light rail, and a stalled mining policy that has caused that sector to practically evaporate on President Aquino’s watch.
In a sign that the cosmos has a sense a justice—or at least a sense of humor—the Capital Economics cover of a BSP press release was coincidentally published the same day as two other pieces of news that most people would probably characterize as being rather more reflective of the true state of the Philippine economy: A Social Weather Stations survey which indicated the real rate of unemployment in the country is not the mild 6.7 percent the government claims, but likely closer to 25 percent; and a disturbing report from the Commission on Audit that the government’s P1.8-trillion budget for 2012 included P538.2 billion of deficit spending, contrary to the Constitution and resulting in negative equity balance of P3.15 trillion at the end of 2012.
Those things might have made a difference had the analysts bothered to do a little more homework, but then again, one thing macroeconomic analysts shy away from is bucking a trend. Southeast Asia is the hot topic in the finance and investing world right now, and while there is certainly some justification for that, the reality is quite a bit more complex and murky than is ideal. Complex murkiness—for instance, the uncomfortable fact that the Philippines’ current account surplus may very well be the result of government fiscal management that is rash and possibly illegal—is not only difficult to present to present in way that is digestible by a mass-media audience, it is even tougher to sell as an investment market. No one in the “economic research consultancy” field wants to be the Cassandra, because Cassandra is not going to attract a lot of paying clients. Honesty may be the best policy—but only if one has other means of making the week’s payroll.