• IMF reviewing 2015 economic prognosis

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    WE are not at all surprised that the International Monetary Fund (IMF) decided this week to ‘review’ its Philippine growth outlook for 2015. In fact, if there’s one question we would like to ask the global lending giant it would be, “What took you so long?”

    The IMF’s decision came in the wake of the unexpectedly low GDP growth rate of 5.2 percent in the first quarter of this year, which was far below the forecast range of 6 percent to 6.8 percent suggested by analysts and government officials. The IMF had predicted a growth rate of 7.3 percent prior to the release of the official data last Thursday.

    We at The Manila Times have been consistent in our view over the past couple of years that the remarkable economic growth of the country over the same period of time has occurred in spite of President B.S. Aquino 3rd and his administration rather than being a positive result of anything he has done. Just yesterday, for example, The Times’ very own Ric Saludo and Ben Kritz discussed in their respective columns the impact (or lack thereof) of government spending on growth, and whether or not GDP growth is even being measured on a realistic scale.

    To be fair to the IMF, they are not the only large organization to overestimate the Philippines, but simply one of a number of institutions whose assessments of the country’s economic prospects too often sound similar to the Aquino Administration’s rhetoric about “good governance,” “transparency,” and “inclusive growth.” And we must acknowledge that the IMF does regularly review and update its conclusions as economic conditions change. What is unusual this time is that the IMF made a point of announcing in advance that their forecast would be revised; in the past, the lender has typically waited until the release of a complementary report or analysis to announce revisions to its outlook.

    One conclusion that could, and probably should be drawn from this is that the IMF is diplomatically warning the Philippines to prepare itself for bad news. While the IMF spokesman in a press briefing last week maintained an optimistic tone by stressing that the lender “still expects growth to pick up later in the year as exports recover with the global economy,” as well as getting a boost from increased public spending, the sunny outlook seemed a bit incongruent when offered alongside an announcement of a likely downgrade of the IMF’s forecast.

    That news, when it comes, will probably be met with the usual response from Malacañang, always quick to take credit for favorable conditions, and just as quick to pin blame for the unfavorable on third parties or other outside forces. The Administration should, however, consider the implications of the IMF’s questioning of its own assumptions: Institutions that have been willing to give Aquino the benefit of the doubt are now beginning to see the divergence between the economy in numbers and the economy on the ground, which will undoubtedly lead them to less optimistic conclusions.

    Even if the lowered expectations are minimal, a few tenths of a percentage point perhaps, the message investors and the public will hear is, “The economy is not doing as well as we thought.” Just as we have been saying all along. Now that the IMF, one global institution the Philippines seems to have a closer than usual relationship with, seems to be saying the same thing, perhaps the President and his office mates will start listening.

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    1 Comment

    1. Teddy Sevilla on

      There is not a little bit of hypocrisy on the spin that a 5.2% growth rate is a disappointment. Most countries in the developed world today would rejoice with 3%. During the same period, the US economy contracted by 0.7%. I very much doubt if the IMF is telegraphing a “bad news” message and intends to spank our country’s economic managers. Theirs is a just routine assessment, right? No need to assign any more meaning than that.

      I won’t argue with Mr. Kritz’ theory that the Aquino growth years are illusory. That the indices, given a different perspective, would lead to that insight. He may be right. It’s just that I am reminded of this particular hardline Christian sect who propounds a curious theory. Using convoluted “scientific” explanations including novel theories of time warps, they concluded that our planet is actually merely 4,500 years old. Darwin and most modern scientists, they claim, have it all wrong; they grossly miscalculated the age of the earth by a factor of 1,000,000! Without validation from another expert source but one who does not carry an agenda, I tend to view such explanations with a grain of salt.

      The IMF is not questioning the Philippines’ methodology of measurement, right? Did the Aquino administration purposefully alter the equations to fit their political agenda? I doubt if they will and can without the IMF calling them out. There are established procedures which I doubt any government would want to mess around with lest they incur the wrath and ridicule of the international community.

      Let us give credit where it is due. A 5% growth rate is not “pwede na” – it is actually very good amidst worldwide economic uncertainty.

      What worries me more are the foundations of our present growth. Grounded on business outsourcing and OFWs, rather than the more substantive manufacturing and agricultural sectors, the long-term outlook does not look great. President Aquino and the other past presidents have failed to establish any blueprint for economic statesmanship. They have not established a long-term vision for growth, much less institutions for such. It was always a matter of “ano ba ang uso ngayon at paano natin pagkakakitaan yan?” We then tailor our educational and economic resources towards that “vision”. Thus the pleas for more call center agents, nurses, welders, seamen, domestic helpers, caregivers, etc.

      Rather than illusory, I tend to say that the Aquino growth years are “tsamba lang.” The developed countries have a particular need for our unique set of skills and cultural inclinations at this particular time period, and we are cashing in on it. What if the situation changes in the mid or long term? The answer is obvious and would not differ even among those of clashing political persuasions.