by CIELITO F. HABITO

RAMDAM MO na nga ba?

Even the current administration is probably asking itself this question — “Do you really feel it?” — since the recorded performance of the Philippine economy in 2007 surprised everyone, including the government. With GDP growth likely to have exceeded seven percent for the full year, the economy appears to have overshot the government target of 6.1-6.7 percent for the year. And with relatively stable prices manifested in a low inflation rate, and an apparently improving jobs picture as of the third quarter, we are finally seeing good news on all three basic economic yardsticks that the ordinary Filipino can understand: presyo (prices), hanapbuhay (jobs) and kita (income). Inflation (2.8 percent) is well within the 2.6-3.1 percent projected range; unemployment is down to 6.3 percent from last year’s 7.3 percent; and income (GDP) growth (7.1 percent so far) is better than the targeted 6.1-6.7 percent. Until recently, the best we could do was a “two-out-of-three” score, with jobs data having consistently lagged behind the other two indicators.

Is the government’s “ramdam ang pag-asenso” media campaign more than self-serving propaganda then? Is the average Filipino family really now better off than before? Or is it all illusory, too good to be true, and/or too good to last?

First, a caveat on the seemingly positive economic growth data. It is worth noting that the quarterly GDP growth figures reported by the government are year-on-year growth rates, measuring how the past quarter’s output grew over the levels posted in the same quarter a year ago. Other countries report their growth rates by looking at quarter-on-quarter growth (i.e. growth over the immediately preceding quarter), making a statistical adjustment to account for seasonal influences, and then translating the number into an annualized growth rate (i.e. roughly, by multiplying it by four). Growth rates computed this way are more indicative of actual short-term weakening or strengthening in the economy.

Government GNP/GDP data actually provide the seasonally adjusted quarter-on-quarter growth rates as well. And here, the news is not so encouraging: GDP grew a mere 0.3 percent over the past quarter, its weakest performance since 2001. This weakening is seen across the major economic sectors, with the industry sector actually contracting by 0.7 percent, the worst performance seen in the last four years. The decline in exports (-4.9 percent) was clearly the main reason for this, which in turn results from a combination of slower economies abroad (especially in the United States) and the appreciation of the peso.

Still, there are hopeful signs of more broadly beneficial growth. Foremost is the strong showing of agriculture, whose 5.6 percent growth in the third quarter improved on the 4.3 percent average growth posted in the first half, which was already better than the sector’s historical average performance. With over 12 million jobs directly coming from this sector (not counting jobs indirectly linked to agriculture, which are even far more than that), good agriculture performance is good news for the rural economy.

THERE ARE two caveats to this good news, however. One, the sector’s performance has always fluctuated widely across the quarters due to the vagaries of weather — especially now that climate change seems to have made weather patterns so much more unpredictable. Thus, one cannot project an improving trend from just a quarter’s (or even a few quarters’) good performance; the outlook remains unclear. Two, if one looks at quarter-on-quarter growth rather than the usual year-on-year rate that is reported, farm growth has actually been weakening. In the third quarter, the sector grew a mere 1.1 percent over the second, compared to 2.4 and 2.2 percent in the previous two quarters. In other words, agriculture has actually weakened through the course of the past year, even though it strengthened relative to its performance in 2006.

The services sector also shows the same stronger/weaker performance so far. That is, compared to 2006 (5.8 percent), the latest 7.2 percent growth is stronger. But compared to recent quarters (8.8 and 8.4 percent), services growth has slowed down. The boost in services is coming mainly from real estate, which continues to zoom consistently above 20 percent, along with private services, buoyed by the call center and business process outsourcing (BPO) surge, which remains strong at 8.5 percent and better than last year’s 6.1 percent growth.

Meanwhile, it is noteworthy that communication has slowed down to a single-digit 6.2 percent after posting consistent double-digit growth in the past years. Are people texting each other less? Or have lower prices induced by strong competition simply cut the margins of the telecommunications companies?

Another hopeful sign is a steady improvement in investment growth. The most alarming aspect of our recent economic performance had been the low levels of fixed investment (capital formation), on which our neighbors have been leaving us far behind. In fact, while our fixed investments grew at an annual average rate of less than one percent since 2002, our neighbors had been boosting investments at around eight to 20 percent every year. Latest data indicate a 7.5 percent growth year-on-year, with public construction being a somewhat less dominating influence than in recent quarters, which is good news. This time, private construction (13.1 percent) is a much stronger contributor to investment growth; in the past quarter, it grew only 2.2 percent against public construction’s 39.7 percent surge.

Investment in durable equipment is also picking up (3.4 percent against 1.7 percent in the first half), and has reversed its eight-quarter slide since 2005. Investments in breeding stock and orchard development also improved over last year’s performance (3.6 versus 1.1 percent), but was slower than the past quarter’s 7.4 percent growth. We need to be able to sustain and intensify these trends if we are to recover the ground we lost over recent years relative to our neighbors.