This was published in Asian Correspondent (May 31, 3:30 p.m.) where I write a column (Philippine Fantasy).
The good news is that the economy grew by 7.3 percent. The bad news is that this is hardly felt.
The Philippine government reported last week that the gross domestic product (GDP) grew by 7.3 percent during the first quarter of 2010. This development was actually described as “(a) glorious ending for the Arroyo administration and a beneficent beginning (for) the Aquino administration.”
Leading presidential candidate Sen. Benigno “Noynoy” Aquino III was quick to dismiss the Macapagal-Arroyo administration’s claim of economic growth. He said that the 7.3-percent growth was mainly due to campaign spending for the recently held elections. “Economic figures for the first quarter are inflated by the campaign spending and hence can’t be claimed as the result of wise economic policies,” Aquino was quoted as saying.
Not surprisingly, Presidential Deputy Spokesperson Gary Olivar stressed that President Gloria Macapagal-Arroyo’s economic policies were the reasons for the GDP growth. In a news report, Olivar said that Aquino has a problem in arguing his points: “The problem is he’s shooting from the hip again. He doesn’t set his target. He just shoots and shoots. I don’t think this (approach) is proper because he will now become the president of our country.”
In the debate about the reported growth in GDP, the latter’s significance in the people’s lives and livelihood gets ignored. Studies have shown that there are problems with the GDP as an indicator of development. One theoretical problem is that it only counts money transactions. It doesn’t consider goods and services that people provide to each other for free.
But more important for a Third World country like the Philippines is the gap between the rich and the poor which the GDP does not take into account. For example, a poor person who earns $100 and his or her rich counterpart who earns $900 would have a total income of $1,000. In our fictional two-person society, the per capita income of $500 (or $1,000 divided by two) does not reflect the income disparity between the two people.
One must also keep in mind that one’s income should meet the cost of living as the latter serves as a measurement of how high or low the incomes are.
In the case of the Philippines’ official statistics, the government tends to downplay the significance of its monthly consumer price index (CPI) and inflation rate reports. In its May 5 press release, for example, the National Statistics Office (NSO) summarized the figures in a technical manner: “The country retained its March headline annual inflation rate figure of 4.4 percent as the annual growth rates posted in food, beverages and tobacco (FBT) and housing and repairs (H&R) remained at their respective previous month’s rates. Inflation a year ago was 4.8 percent.”
The NSO fails to mention that the CPI is the basis for measuring purchasing power of the Philippine peso. Based on a 29-column table presented as an annex to NSO’s May 5 press release, one finds out what the government does not mention officially in its press releases every so often but which the Filipino people feel every day: The peso has substantially lost its value through the years. (See Table)
| Consumer Price Index (CPI) and Purchasing Power of the Peso (PPP) April 2010 (base year of CPI: 2000; PPP in Philippine pesos) |
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| CPI | PPP | Erosion | |
| Philippines | 165.9 | 0.6028 | 39.7% |
| National Capital Region (NCR) | 164.6 | 0.6075 | 39.2% |
| Areas outside NCR | 166.5 | 0.6006 | 39.9% |
| Cordillera Administrative Region (CAR) | 165.6 | 0.6039 | 39.6% |
| Region I (Ilocos) | 164.8 | 0.6068 | 39.3% |
| Region II (Cagayan Valley) | 162.0 | 0.6173 | 38.3% |
| Region III (Central Luzon) | 162.7 | 0.6146 | 38.5% |
| Region IV-A (Calabarzon) | 163.6 | 0.6112 | 38.9% |
| Region IV-B (Mimaropa) | 161.8 | 0.6180 | 38.2% |
| Region V (Bicol) | 166.6 | 0.6002 | 40.0% |
| Region VI (Western Visayas) | 163.9 | 0.6101 | 39.0% |
| Region VII (Central Visayas) | 170.4 | 0.5869 | 41.3% |
| Region VIII (Eastern Visayas) | 168.8 | 0.5924 | 40.8% |
| Region IX (Zamboanga Peninsula) | 167.7 | 0.5963 | 40.4% |
| Region X (Northern Mindanao) | 172.7 | 0.5790 | 42.1% |
| Region XI (Davao) | 172.8 | 0.5787 | 42.1% |
| Region XII (SOCCSKSARGEN) | 166.3 | 0.6013 | 39.9% |
| Region XIII (Caraga) | 174.2 | 0.5741 | 42.6% |
| Autonomous Region in Muslim Mindanao (ARMM) | 190.3 | 0.5255 | 47.5% |
| Source of basic data: National Statistics Office (http://www.census.gov.ph/data/sectordata/2010/cp100404r.htm) Author’s computation of PPP based on the formula: (1/CPI) x 100; and erosion (in %), (1-PPP) x 100 |
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The figures show that compared to prices 10 years ago (i.e., in the year 2000 which is currently the base year in computing the CPI), the Philippine peso has been eroded by 40 percent nationwide. This means that what used to cost about 60 centavos (US$0.0130) in 2000 is now valued at PhP1.00 (US$0.0216).
Those living in the Autonomous Region in Muslim Mindanao (ARMM) has the lowest purchasing power as the value of their money has been eroded by 47.5 percent.
To be fair to the government, many official statistics are readily available online. But from this example, it is clear that one needs to deeply analyze the official data to make sense of the reality that the government tries to hide. In other words, one should not take at face value the government’s presentation and interpretation of data.
Indeed, there is some truth to the joke that government statistics are now like underwear: What they show is suggestive, but what they conceal is vital.