Tuesday, July 28, 2009

Number Crunching, Lying and Arroyo’s SONA

Palace poodle Alex Magno, minutes before yesterday’s SONA predicted the President will make a “very detailed, specific, technical report.” Indeed, the President is counting on most Filipinos not being able to make heads or tails of her laundry list of statistics. After all, these are the numbers she collated from the various departments. Who can dispute official government data?

Others have pored over the coded political messages couched in her hour-long speech. While remaining coy about perpetuating herself in power, Mon Casiple points out that Arroyo is not likely to leave the political scene. Manolo Quezon summed in three brief sentences the President’s core messages:

1. Don’t count me out.
2. Cha-Cha is a go.
3. We will mobilize vs.certain presidential candidates.

Popoy De Vera makes a quick assessment of GMA’s so-called accomplishments. Of eight points: balanced budget, education for all, automated election, transportation and digital infrastructure, terminate hostilities with milf and npa, healing the wounds of EDSA, electricity and water for all, opportunities for livelihood and 10 million jobs, decongest Metro Manila, develop Subic and Clark, only one item is a clear fact. The other are either complete fiction or deserve qualifiers.

While there may be no ‘smoking gun’ to tie the President to the graft and corruption scandals that have plagued her stay in power, Rep. Mong Palatino reminds us of human rights violations and the undisputed (missing) body count of militant and journalist desaparecidos.

Sassy Lawyer makes the obvious point that the President will strive to make her last address optimistic. Why indeed would she talk about her failures? Because the SONA is a highly publicized event it is a good opportunity for the president to legitimize and deodorize her incumbency. Nobody expected an inspirational tale from her. Nobody expected a rallying cry that would capture the Filipino nation’s imagination. So yes, her SONA, like her previous ones, was short on rhetoric and long on numbers and cheap shots at ‘opposition’ players.

Let us go back to the outrageous claims on the economic front. Gloria Arroyo PhD’s number crunching deserves some demystification. Aside from outright lies, they also betray false assumptions that result to her claiming the country’s ‘economic fundamentals’ are sound.


Watching her speech yesterday, my eyebrows shot up the roof when she said she had “exorcised” the demon of foreign debt.

Far from Neutral uses IBON data to illustrate that Arroyo said an outright lie when she said that she has “exorcised” Philippine debt. By March 2009, government debt has nearly doubled from P2.17 trillion in 2000 to P4.23 trillion.

In a roundtable discussion organized by the Freedom from Debt Coalition, former Budget Secretary Boncodin presents us more hard data on the government's budget deficit and debt.

Debt owed to domestic lenders rose from P1.06 trillion in 2000 to P2.4 trillion in 2008. Debt owed to foreign lenders rose from P1.09 trillion to 1.8 trillion in 2008. And the President, dear beloved President in pink, has the gall to say she has "exorcised" debt???


Arroyo also generously gave herself credit for ‘accomplishment’s in which she had no direct hand.
“In 2008 up to the first quarter of 2009 we stood among only a few economies in Asia-Pacific that did not shrink.”
Dr. Josef Yap of PIDS observes the drop in GDP growth rate in 2007 is consistent with the onset of the global financial crisis. And the Philippines is not unique in weathering the financial storm. He credits this to the following:

- the very limited direct exposure of the region to subprime and other related securitized products
- relatively strong bank balance sheets with a return to profitability—as impaired loans from the 1997/98 Asian financial crisis have been worked off
- improvements in risk and liquidity management
- strengthening of supervisory and regulatory systems
- moves by banks into new and profitable domestic business lines such as consumer lending.

The country has escaped the worst of the crisis because of the conservatism (dare I say backwardness?) of local financial markets. This meant financial players preferred to keep capital at home rather than play high stakes in the global casino. This conservatism probably has more to do with hard lessons learned in the 1997 financial crisis than excellent forecasting by Arroyo’s economic team.

In the same FDC roundtable mentioned earlier, another former Budget Secretary, Benjamin Diokno, presents data on falling exports.

He expects these figures to worsen in 2009 as the economies of the top 10 destinations of our exports, accounting for 84 percent of the total, are also expected to weaken.

The President was triumphant in proclaiming yesterday:
Our reforms gave us the resources to protect our people, our financial system and our economy from the worst of shocks that the best in the west failed to anticipate.

Cash handouts give the most immediate relief and produce the widest stimulating effect. Nakikinabang ang 700,000 na pinakamahihirap na pamilya sa programang Pantawid Pamilya.

We prioritize projects with the same stimulus effects plus long-term contributions to progress.
Early in the year the administration announced a P330 billion stimulus package that was supposed to target spending to save the economy. This just means the government (instead of the private sector) will spend money to promote economic activity. For example, if it commissions public work projects - this will create employment and business opportunities for construction workers and contractors.

Since the President makes no mention of the results of her stimulus package, did she plunk all P330 billion in her “Pantawid Pamilya” program?

Former National Treasurer Prof. Briones notes that of the P1.4 trillion 2009 budget, only P10 billion was allocated for the “Economic Stimulus Fund” and the rest were from normal government spending.

So, did all P10 billion go to Arroyo’s “Pantawid Pamilya” program?


Another outright lie is her claim that poverty has gone down during her watch.
“Bumaba ang bilang ng mga nagsasabing mahirap sila sa 47% mula 59%. Maski lumaki ang ating populasyon, nabawasan ng dalawang milyon ang bilang ng mahihirap.”
Not less than the government’s NSCB data disproves her claim! While the data may be dated at 2006 stats, the numbers categorically show a worsening of poverty incidence between 2000 and 2006 and more people now fall under the poverty threshold.


The World Economic Forum is a pow-wow of the most powerful business actors in the world. Yearly they compile a report called the “Global Competitiveness Report.” This signals to businesses where they may invest profitably. Last year, the report categorically states that foreign businesses have been avoiding the Philippines like the plague for these reasons:

1. Corruption
2. Inefficient government bureaucracy
3. Inadequate supply of infrastructure
4. Policy instability
5. Government instablity/coups

Somehow, I doubt that Speaker Nograles’ proposal to amend the constitution, supposedly to encourage investments, will attract these businesses. They will have to eliminate themselves first.


Many experts now agree that GDP is not a sufficient measure of a country’s economic welfare. As the adage goes, if you cut trees the GDP goes up. If you have two cars smash into each other on the road, the GDP goes up. This is because GDP accounts for activities that go into producing products (things) and services. It is an ‘amoral’ measure in that it posts a plus for trees cut but cannot measure the costs of the same. Obviously, we all need trees for clean air.

Nevertheless, let us try to unpack the mystery that is Gloria Arroyo’s bullish GDP! Yesterday she happily announced:

“…our economy posted uninterrupted growth for 33 quarters; more than doubled its size from $76 billion to $186 billion. The average GDP growth from 2001 to the first quarter of 2009 is the highest in 43 years.”

Looking at the UPSE Economic Database, the figures seem to confirm a continuous upward increase in GDP from 2001 to 2008. The thing that puzzles though, and what ultimately makes experts scratch their heads, is why the so-called growth does not match other indicators to measure the over-all health of the economy.

This paper written by former NEDA head Felipe Medalla and Karl Robert Jandoc note that while GDP growth rates are on the up and up, other indicators do not go up along with them.
"We ask why is it that if economic growth is being correctly measured, many indicators and data sets are at odds with the supposedly high economic growth. Moreover, we find that Philippine growth patterns—shrinking growth of domestic absorption, exports, and imports accompanying rising output growth—do not fit the pattern in other Asian economies."
Pattern One: GDP went up even as imports contracted. These economists note that the pattern for other Asian countries show that both indicators go up at the same time. It makes sense, if the local economy is making more goods and providing more services, it will need to import materials - the most crucial of which that we lack, I think, is oil.

Pattern Two: GDP went up even as exports also contracted. Among the nine Asian countries surveyed, the Philippines again miraculously bucks the trend! There were more goods and services consumed...but we didn't export any of them?

So if GDP has enjoyed a consistent upward trend since Arroyo took over, and the products and services the economy produced were not exported, this must mean that Filipinos themselves did most of the consumption.

Medalla and Jandoc express serious doubts about the government's statistics on the strength of the Filipino's buying power. They make mention of many other inconsistencies, and here I will only mention that between Gloria's Statistics and the Family Income and Expenditure Survey.
"Now, if the obvious fact that the FIES and the NIA begun to diverge after 2000 is accepted, the question is which data set should given more weight for assessing what happened to the economy after 2000. As already pointed out, the incredibly high growth of food consumption and personal consumption growth that far exceeds the growth of purchasing power as estimated in the NIA itself already casts strong doubt on the claims that the economy has grown the fastest in recent years."
So, the GDP grew even when the Filipino's buying power did not. Allow me then to paraphrase their conclusions without jargon - something is wrong with Gloria's number crunching.


After all this the President concludes: “The state of our nation is a strong economy.”

The President is not coy about her administration’s engines of growth. Her castle rests on our young and talented serving BPOs and the export of more of the young and talented to all corners of the world.

Why I do not think this is sustainable and will hardly earn us First World status by 2020, deserves another blog entry.

For now, let me just say, I am not looking for a visionary come 2010. I am looking for one who will at least not lie so audaciously.

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