What the GDP data actually means

Published on Monday, 03 December 2012 17:58

Written by John Mangun / Outside the Box

MALACAÑANG has said the Philippines has progressed from being a “tiger” to a “roaring lion,” thanks to strong economic growth in the third quarter (Q3). I can’t wait to see what animal the country transforms into if data for the fourth quarter brings more good news. Perhaps “Philosaurus Rex”?

While the Aquino administration is acting like a cock crowing from the rooftop, one must remember that both the tiger and lion are already endangered, and dinosaurs are already extinct.

A closer examination of the internals from the latest economic data shows that it is the private sector that should be crowing, not the government.

The administration would like people to believe that this recent jump in economic activity was due to public spending. While government spending did increase by 18 percent, the actual amount is not that significant in the overall scheme of things. The administration has spent an additional P43 billion in the past quarter; consumers, an additional P150 billion.

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Gross domestic product (GDP) in the Q3 was P2.6 trillion, with total government expenditure accounting for 10 percent. The administration may have played an important role in the nation’s economic activity, but it is not the driver that it would like us to believe.

There are those who believe that government spending on construction was the key to the growth. Nothing could be farther from the truth. Government construction spending rose by P11 billion, but private construction spending was P50 billion higher.

The private sector has given the administration the benefit of the doubt as to its economic policies and actions for two years. And yet, nothing has happened.

The government’s anti-corruption drive has been mediocre. Gold smuggling is equal to almost 90 percent of total gold production. Oil smuggling is rampant and seems unstoppable. Gasoline imports are down 15 percent, with liquefied petroleum gas imports down 24 percent, and those are not being made up by domestic oil-product manufacturing. Newly released numbers show that officially recorded crude oil imports for 2012 are down 30 percent since last year. It is impossible that the country is using 30 percent less oil, given the economy grew to 6.5 percent in the first nine months.

The Public-Private Partnership Program is a total failure. Not one significant project is even near completion. Foreign direct investment (FDI) is dead. The Philippines is trying to beat economically troubled Greece in bringing in the most FDI for 2012. The administration has killed the mining industry. Over $1.5 billion earmarked as FDI for mining in 2012 has been deferred, probably until the 2016 elections.

While the administration might truly believe its own press releases about its driving economic growth, it is the private sector that has suddenly come to life. This is something that the government should be concerned about.

There has been no significant economic accomplishment or change in government economic policy in the last six months. Any improvement in government finances is only a continuation of what has been happening in the last four years.

To say that government policies are taking effect and accounting for the economic growth does not make sense.

I seriously doubt if property developers gathered at board meetings said, “The government is finally working. Let’s spend.” This is more likely: “We’ve waited long enough for something to move. Not happening. Let’s spend.”

The administration now runs a real risk of simply being ignored. Philippine administrations are all “lame ducks” because of the one-term limit. However, this is something different.

Four months after Executive Order (EO) 79 on mining was issued, the Department of the Interior and Local Government released Memorandum Circular 2012-181 on November 8 to all local government units (LGUs). The memorandum begged the units to follow the EO, citing the legal reasons why compliance is mandatory.

A presidential order has the force of law. Why would the interior secretary remind LGUs to comply with the EO? Are they ignoring it?

If the business community and, perhaps, the provincial LGUs are moving in their own direction, then the administration has a real problem.

To misquote Gandhi: “First they ignore you, then they laugh at you.”

The 2013 elections should be very interesting.

E-mail to mangun@gmail.com, Web site is www.mangunonmarkets.com and Twitter @mangunonmarkets. PSE stock-market information and technical analysis tools provided by COL Financial Group Inc.