Another meaningless boilerplate economic forecast

Ben D. Kritz

Ben D. Kritz

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.


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  1. Good for you Mr. Bagong Bayani. But don’t insist that we buy your idea of progressive life because some are not blind and deaf, and some have the capacity of looking into the big picture such as what the writer did here. I hope you are not living like those people who brought the 2008 Global Financial Crisis in spot light and let the major economic players of the world in big trouble. Well, that crisis alone, affected millions of lives and added more poor people population to the world. Those people like you are deceiving others in order to continue their grandiose life. They keep on saying that the economy is good and progressing yet the truth is the economy is like an atomic bomb that waiting for the call to launch and blast. Well, after that event, some of those people involved in making such facade are hiding to their mansions and thinking, anyway we are not hardly affected, actually we have benefited a lot from this situation. The thing is, selfish and greedy people are just around us. They are wearing a superman suit but not to play a super hero but a super villain.

  2. To a layman’s view the economy is not designed to benefit the majority of the population. It is very obvious that the favored taipans are always on top of everything in this country. Why because, one example, the gov had already relinquished their responsibilities to the private investors regarding the management of almost all the industrial utilities raking in profits to the detriment of the poor consumers. And who are the ones not affected in any way? One, the greedy politicians, two, the Peace officers and LGU’s on the take of jueteng money, gov officials conniving with smugglers, and so on and so forth. We readily allocate funds for senators and congressmen, but we cannot spare funds to protect our environment (illegal logging and black sand mining as examples), education programs and protect the people from disasters.

  3. Sifting through this article and other related-pertinent facts of RP economics would reveal all these CONCOCTED stats are designed to sanitized an image, masked a stagnant, sub standard true picture of the nation’s industrial state relative to regional and global stature.

  4. What do we expect from you Ben, you are on MT’s payroll so you have to toe the line.
    Sure there are plenty of issues and critics like you to deal with, but we know things are moving and progressing here. The forecasts are just reflections of that. I know that the economy is moving, I for one is benefitting from what’s happening around me (our current business is on high gear , another one on the pipeline, we bought a new SUV, my family’s going for a holiday tour next month). I have not seen such economic activity in my lifetime. One just needs to stop complaining all things to the government and simply put his time on productive endeavors to improve his lot. Ok, you don’t care we know, your job is to critic. That’s good at least you have a job.

    I made one comment on another article before but wasn’t posted, sure this one gets deleted as well simply because I happen to believe the opposite.

    • [Editor’s note: Sir, Mr. Ben Kritz is an expert business analyst who is paid to write whatever he wants to as an INDEPENDENT COLUMNIST in The Manila Times. We do not have a line to toe. We are against the schemes and actions of all that, we the Editorial Board, believe are harmful to the Filipinos people and our Philippine Republic.]

    • The “I got mine, I don’t see what the problem is” attitude is why this country has the wealth gap it does, and why approximately 60-65% of the population does not have adequate access to “productive endeavors”.

    • Are you sure your ‘pipe line’ is not a ‘pipe dream’?

      Things that are moving and progressing is only for a handful privilege and not for the majority, it might be okay for short term profiteering but in the long run it will dry up, since a vast majority of the population will not have enough money to buy things made locally and this will turn back to your ‘pipe dream’ to bite you.

      Enjoy it while it last, or haven’t you heard, Meralco is investing in Singapore, purchasing 70 percent stake of Singapore power plant?