Post -Yolanda rehab increases national GDP?

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MIKE WOOTTON

MIKE WOOTTON

I’m still uncertain as to my re-action to the news reported in this newspaper from an organization called Citi Research that the rehabilitation work following the Yolanda tragedy could “boost the Philippines economic output by 2.2 percent.” Now what should we make of such a bullish type of statement? “Great, GDP will improve because there will be a big spend, a reported P170 billion, on creating jobs and buying construction materials the national average income will improve and overall demonstrate economic development progress.” Or should we say “Who are these people that are trumpeting improvements in economic indicators thanks to human suffering in a calamity that left over 6,000 dead and 4.1 million displaced? Most normally GDP effects of calamities are negative aren’t they? Are we to assume that the P170 billion allocated would not have been spent were it not for the Yolanda disaster?”

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I am inclined to the second option above and not necessarily for emotional reasons. No doubt a large part of the P170 billion has been or will yet be sourced from disaster aid provided by the international community. If it hasn’t then where by the way will the international aid money (P35 billion) requested by the United Nations Strategic Response Plan for the Philippines and the P46 billion provided by the EU go? As a minimum such monies or in-kind aid should be woven into the Yolanda recovery plan and of course we know that headline aid numbers never match cash actually received.

It is well known that disaster aid money (that is actually received) can vanish in governments that are less than honest. Some despotic governments will even go so far as to cause humanitarian disasters in order to attract aid money which they can then steal. There is a published quote by a warlord in Liberia saying that he will deliberately starve the children in a town in order that foreign aid will be attracted which he will then steal! Things are not quite as bad as that around here, yet, but if they were I don’t doubt that Citi Research would see it as a positive economic contribution – the warlord would spend the money on guns and consumer items like ammunition which would inflate GDP.

But GDP is not supposed to reflect morality or even legality, but the way in which it is made up rather than the headline number itself give a good guide to the structure of an economy and the reality of how money is made. The European Union has recently introduced new rules for measuring GDP which have increased the size of the UK GDP by GBP 65 billion or 6 percent higher than the previous year. Interestingly illegal drugs and prostitution have contributed about GBP 6.7 billion in the new figures, giving a useful increase of 0.7 percent to GDP.

Which all goes to show that these sort of statistics mean very little as a simple headline number and are easy to manipulate unless you get down into the detail of what the number actually represents. In the case of the European Union and the UK, wealth has been created through illegal drug dealing and prostitution for a long time, they have just not been included in GDP calculations. To include them as well as other things like research and development gives a much better picture.

But the situation with including typhoon Yolanda aid contributions is different. A disaster on such a scale is hopefully a once off event. Yolanda reportedly caused very minor “damage” to the Philippines GDP as the entire population of the Eastern Visayas, which includes Biliran, Leyte, and Samar islands, accounts for less than 4.5 percent of the country’s population and its share of economic output is even smaller at 2.2 percent of total national GDP. So if we take the Citi Reseach figures at face value the GDP of the Eastern Visayas will double as a result of the disaster but will be basically putting back things that have been damaged, so whilst a 2.2-percent increase in GDP may be justifiable statistically it is just a one time blip on the graph which does nothing to advance the economic development of the Philippines in a region in which real economic activity is in any event minimal.

It is inappropriate to consider relief and reconstruction work post Yolanda in terms of economic development or as any sort of indicator of the state of the national economy. It is simply money spent and economic activity generated in order rightly to rebuild what has been destroyed by a natural disaster but I have little doubt that the Citi Research claimed increase in economic output will turn up as a well publicized indicator on how well the Philippines economy is doing!

Mike can be contacted at mawootton@gmail.com.

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