Arroyo's rosy fiscal picture in doubt

PUBLISHED : Wednesday, 02 April, 2008, 12:00am
UPDATED : Wednesday, 02 April, 2008, 12:00am

Economists question record 7.3pc growth

President Gloria Macapagal-Arroyo spent the past three days in Hong Kong, touting her government's economic achievements at an investment summit.

But back in Manila, some economists are voicing suspicion about the country's record 7.3 per cent growth last year.

'That recent economic growth, the highest in three decades, is likely a statistical fiction,' University of the Philippines economics professor Felipe Medalla said. Professor Medalla served in the government of Mrs Arroyo's predecessor, Joseph Estrada.

Instead, gross domestic product probably grew by about 5.5 per cent, he said, blaming President Arroyo for the alleged overstatement.

He said 'the president is the liar' and not the National Statistics Co-ordination Board, which he once headed as economic planning secretary.

Other doubts have been raised about the accuracy of the government's claimed achievements.

Last month, Trade Secretary Peter Favila told senators he was aware the Chinese government had recorded US$30 billion worth of bilateral trade with the Philippines last year, weighted in China's favour, while the Philippines recorded a mere US$8 billion of trade. He said he could not explain the discrepancy but had asked government statisticians to look into it.

On Monday, Mrs Arroyo's presidential management staff chief, Ricardo Saludo, brushed off the concerns. 'We do not care to respond' to the economists' claims. 'They have to prove it,' he said.

'Look at the economic fundamentals and economic indicators of the country today and go back to those of 30 years ago. Did you ever see a budget deficit less than 1 per cent of GDP, remittances at an all-time high? If you look at all of that, surely a statement that the economy is doing better than in the past 30 years is defensible at the very least, if not probably true,' Mr Saludo said.

Last year's record economic growth has become political fodder since the presidential palace cites it as a compelling reason to reject calls for Mrs Arroyo's resignation over a tainted contract with Chinese corporation ZTE, which she has since cancelled.

Cielito Habito, head of Ateneo de Manila University's Centre for Economic Research and another former economic planning secretary, cited other discrepancies in the government's economic figures.

He said studies of Asian economies found a direct correlation between GDP growth and growth rates measured as a combination of the consumption in four sectors - private consumers, the government, private investors, and overseas consumption of Philippine goods and services.

But he said that under the Arroyo government, this latter measure had declined - while GDP growth had supposedly increased.

Both Dr Habito and Professor Medalla said that during the Arroyo presidency, the four-sector growth rates 'are significantly lower' than during the 1990s presidency of Fidel Ramos. But Mrs Arroyo's GDP figures still ended up higher because imports were 'much lower than during the Ramos years,' Dr Habito said.

He said he suspected imports were now being grossly understated.

Both Professor Medalla and Dr Habito also noted a discrepancy when they charted private consumption growth (PCE) based on two sets of data - one from a survey of family income and expenditures (FIES) of 50,000 households conducted every three years, and the second from GDP data from state agencies, and extrapolations of estimated growth.

From the 1980s to the year 2000, 'the two trends had a clear, systematic relationship ... but from 2001 onwards, PCE growth based on GDP data inexplicably got jacked up much higher than PCE growth implied by the FIES data, so the data points for 2001 onward end up in the wrong place on the graph,' Dr Habito said.

He said: 'The jump was so drastic, PCE based on GDP data grew fastest in the Arroyo years, and yet PCE from the FIES grew the slowest in that same period.

'Most analysts who know the data would tend to believe the FIES more.

'If this indicates PCE to be overstated in the GDP accounts, therein lies strong reason to suspect GDP growth has been overstated.'

A tale of two figures

Trade between the Philippines and China, as recorded by China, in US dollars: $30b

Trade between the Philippines and China, as recorded by the Philippines: $8b