ON Oct. 1, 2021, I moderated the kick-off ceremonies of the 32nd National Statistics Month, hosted by the Department of Labor and Employment (DoLE).
Statistics affect the lives of the Filipino people in more ways than one. When Philippine Statistics Authority (PSA) Undersecretary Dr. Dennis Mapa announced last August 10 the 11.8-percent gross domestic product (GDP) growth rate during the second quarter of 2021, the statistics made several Filipinos more optimistic and hopeful. Whenever they hear of daily health statistics that highlight more infections and deaths, many are fearful, if not immobilized.
Gross domestic product is the sum total value of all economic activities — production, sales, purchases, interests paid or earned, cost of repairs of vehicles that figure in an accident, government spending for infrastructure, cost of noodles in the "ayuda" package, hospital bills for a newborn, cost of funerals, Covid-19 expenses and other conceivable activities.
My favorite economist and friend Cielito Habito distinguishes between GDP and GNP in a very interesting way. He says that GDP is Gawa dito Pinas — all economic activities within the Philippines. Gross national product (GNP) is, to him, Gawa ng Pinoy, wherever the Pinoys are in the world. GDP includes economic activities of transnationals and foreign companies here. Earnings and economic activities of Pinoys abroad form part of GNP.
According to Wikipedia, the Philippine economy is the 27th largest in the world (IMF, 2021). We are considered an emerging market (EM), a newly industrialized country (NIC) with an economy that is "in transition from one based on agriculture to one based more on services and manufacturing." When I was in short pants, the Philippines was one of the top exporters of coconut (copra) and sugar. Today, our primary exports include semiconductors and electronic products, copper products, coconut oil and fruits. Our trading partners are China, the US, Japan, Singapore, South Korea, Hong Kong, Thailand, Taiwan, Germany and the Netherlands.
According to World Bank (WB) data, the Philippines' GDP is valued at $361.489 billion in 2020 and could grow by 4.5 percent in 2021. The ADB's forecast GDP growth in 2021 for the rest of Asean 6: Vietnam 6.7 percent, Malaysia 6 percent, Singapore 6 percent, Indonesia 4.5 percent and Thailand 2.5 percent.
Math and magic
Like Penn Fraser Jillette and Raymond Joseph Teller (aka Penn and Teller), illusionists have a common vocabulary to explain their magic. In Economics, there's a phenomenon called "base effect," when the latest GDP figure is compared to a much lower figure from the previous period, effectively making an impression that there was a significant economic recovery. Sounds phantasmagorical!
Economist JC Punongbayan noted that "the headline-grabbing second quarter growth for 2021 is a 'mathematical illusion', as GDP nosedived by 16.9 percent in the same period in 2020, marking the start of the Philippines' recession."
Rappler's Ralph Rivas wrote, "National Statistician Dennis Mapa noted that GDP actually posted a negative quarter-on-quarter growth rate of -1.3 percent on a seasonally adjusted basis." If you think that we're out of the woods with the 11.8-percent jump in GDP in 2Q2021, check this out. The accommodation and food service sector posted the highest growth rate with 53.4 percent in the second quarter. Has this business sector recovered? Not by a long shot.
Despite the 11.8-percent GDP growth in 2Q2021, the Philippine economy in real terms is not yet back to the 2019 level, but our leaders do not explain that reality to the average Filipino.
Jobs and consumption
Last year, Maybank released its Asean Economics report titled: "Labour Market: Retrenchments and Recovery." Maybank ATR Kim Eng reported that "unemployment rate in the Philippines could reach 18.5 percent in 2020, compared to Thailand's 15.9 percent, Indonesia's 5.9 percent, Singapore's 4 percent and Vietnam's 3.6 percent."
In April 2020, the PSA booked a 17.7-percent unemployment rate, or 7.3 million jobless Filipinos. As I wrote this piece, I checked with Labor Assistant Secretary Nikki Rubia-Tutay. She said the unemployment rate in the Philippines is at 8.1 percent or at 3.9 million as of August 2021. At least, we have better unemployment rates than those of Kiribati (30.6 percent), Samoa (29.8 percent) and Lesotho (28.1 percent).
Consumption comprises 70 percent of the Philippine economy — Filipinos selling to other Filipinos. Other countries are more-export oriented – selling to other countries. According to MacroTrends, the GDP per capita in the Philippines was $3,252 in 2018, $3,485 in 2019 (7.17 percent increase), and $3,299 in 2020 (5.35 percent contraction). Trading Economics' global macro models forecast the Philippines' "GDP per capita to reach $3,160 by the end of 2021."
The GDP figures don't mean much unless they translate into more decent jobs, lesser poverty incidence and lower cost of putting food on the table.
Investor and consumer confidence
Jobs are created by investments — foreign and domestic. Investments pour in to attractive destinations — countries with political stability, great investor returns, great soft and hard infrastructure, low cost of operations (energy cost, labor cost, etc.), high ease of doing business, and availability of skills required by the investors. If investors decide to relocate here, there could be more jobs and the workers would have more purchasing power to boost consumption, which is what GDP in the Philippines is mostly about.
As we focus on consumption to boost our economy, other ASEAN countries exported heavily and increased their inflow of dollars. Citing ADB figures, Habito wrote on Sept. 14, 2021, "Our average annual merchandise exports over the last four years (2017-2020) were valued at $69 billion." Compare this to "Indonesia's $170 billion, which is 2.5 times our exports, and Malaysia's $234 billion, Thailand's $242 billion, Vietnam's $251 billion, and Singapore's $387 billion."
An important factor in job creation is investment. Santandertrade.com data show that "in 2020, the Philippines had a total FDI (foreign direct investments) of $103 billion, against Malaysia's $174 billion, Vietnam's $177 billion, Indonesia's $240 billion, Thailand's $272 billion, and Singapore's $1.9 trillion."
In 2021, the United Nations Conference on Trade and Development (Unctad) reported that Singapore got $91 billion in FDIs, Indonesia $19 billion and Vietnam $16 billion. Tesco (of the UK) divested its $6 billion investment in Malaysia, which reduced its net FDIs to $3 billion. Cambodia's FDI growth was flat at $3.6, while Myanmar dropped its net FDI to $1.8 billion. The SBP reported a 25.4percent reduction in the Philippines' FDI inflow in May 2021; no annualized 2021 data are available at this writing.
The age-old formula remains the same: INVESTMENT EQUALS EMPLOYMENT.
ING Bank N.V. Manila senior economist Nicholas Antonio T. Mapa warns: "In a year that started with so much hope for a strong recovery ... 2021 is indeed turning out to be like 2020, with the Philippines likely headed for a lower growth trajectory. Our full-year GDP forecast is at 3.8 percent...."
Ernie Cecilia is the chairman of the Human Capital Committee and the Publication Committee of the American Chamber of Commerce of the Philippines (AmCham); co-chairman of the Employers Confederation of the Philippines' (ECOP's) TWG on Labor Policy and Social Issues; and past president of the People Management Association of the Philippines (PMAP). He can be reached at [email protected]