Is the state of the nation really sound?

IT seems like “sound” is President Ferdinand Marcos Jr.’s favorite description of the state of the nation. It is the second time he has used it to end his speech for that annual political ritual.

It’s unfortunate though that Marcos’ second SONA in this very sentence implied a big fallacy: “While the global prospects were bleak, our economy posted a 7.6 percent growth in 2022 — our highest growth rate in 46 years.” Marcos here is implying that we defied the global headwinds under his leadership enough to have a booming economy, the third highest in 49 years. It is beaten only by the 8.8 percent rates in 1973 and 1976, as the economy boomed during martial law’s first years, to a great extent since it suddenly imposed order on the nation, encouraging investments. Marcos’ father must have turned in his grave and said: “Nambobola pa ang anak ko a.”

The economy was not a booming one in 2022. The economy slowed down in 2020 so severely, at a rate of 9.5 percent, the worst such contraction in 50 years, because of the Covid-19 pandemic. How could the economy grow? The pandemic required a virtual stoppage of economic activity.

The 7.6 percent that Marcos boasts of is an arithmetical illusion; it means only that the economy is recovering from a deep pit. The gross domestic product (in real inflation-adjusted terms) fell from $396 billion in 2019 to $358 billion in 2020 and to $378 billion in 2021. The 7.6 percent GDP growth that Marcos is boasting about for 2022 means only a minuscule 2.1 percent growth from our $396 billion GDP three years ago, barely enough to account for the 1.4 percent increase in our population.

The arithmetical illusion is no longer there, so our first-quarter year-on-year GDP growth was posted at 6.4 percent. Both the Asian Development Bank and the World Bank forecast 6.1 percent growth for this year and the next.

I’m not sure if we can call the state of the nation sound when, after falling down, it’s now on its feet, but hardly at a fast pace — at the double-digit rates that more than a decade ago made Malaysia and Thailand beat us, and earlier South Korea, Taiwan and, of course, the Chinese.

Foreign trips

Marcos said in his speech: “We have embarked on foreign trips to promote the interests of the country… Those economic missions have yielded an estimated total investment value of $71 billion, or P3.9 trillion, with a potential to generate 175,000 jobs. The implementation of recent economic reforms is under way. BOI-approved investment projects have reached P1.2 trillion during our first year, while other strategic investments approved for processing through the newly established “green lanes” amount to P230 billion.

I certainly hope those figures his officials gave him are accurate and that those investors won’t change their minds. Right now, those figures are a quantum leap from reality, even the reverse of it.

According to Bangko Sentral ng Pilipinas statistics (which monitor actual inflows and not promises called “commitments”), the level of foreign direct investments stood at $4,334 million in June 2022, or just before Marcos assumed office. It more than doubled to $9,200 million at the end of last year. However, the level has steeply dived to just $448 million in January 2023 and to just $2,918 million in April, for which the latest figures are available.

The BSP data show that during Marcos’ first nine months in office, there was a capital outflow of nearly P2 billion. That actual April direct investment level of $2.9 billion is 24 times the $71 billion Marcos said was the “investment value” of his economic missions. What has his trade and industry secretary, who most likely gave him these figures, been smoking? (See FDI figures, 2020-2023.)

Our economic managers aren’t talking about this recent huge capital flight. It should already raise loud alarms for Marcos’ laid-back economic team to find out why this has happened and how or what measures to take to attract foreign investments.

Objective

What other objective numbers should we look at to determine if the nation’s state is sound or not, and not just merely blah-blah opinions about it?

The average inflation rate during Marcos’ first year in office was 7.4 percent, the highest in 14 years and lower only than the 8.8 percent in 2008 — during the world’s worst recession that broke out that year. I hope, though, that Marcos is right when he said in his speech that inflation was in “the right direction,” by which he meant that after peaking at 8.7 percent in January, it has receded to 5.4 percent. What is worrying, though, is that the rise in consumer prices usually increases in the months toward the end of the year, driven by increased demand for commodities.

Unemployment indeed has receded from 5.2 percent at the start of his administration to 4.3 percent last month. But that is still high compared to the 3.3 percent average unemployment rate in the past 20 years. Our state of the nation was sounder then?

And of course, the so-called misery index (see figure) — the sum of inflation and unemployment rates — is a crude, but objective measure to determine if a nation’s people have become miserable or not. Filipinos, going by this measure, have become more miserable with an 11.9 index, nearly at the level in 1998 and 2008 when global economic crises broke out. But the latest version of those crises, the Covid-19 pandemic, ended in 2021.

Surprisingly, out of the past six administrations, the one when we were least miserable — posting an average of 5.6 percent — was President Rodrigo Duterte’s watch. No wonder he still posts a 92 percent satisfaction rating.

It would have been more informative if Marcos had discussed in detail how he would tackle inflation and joblessness, whose sums do reflect whether Filipinos are miserable or not.

However, Marcos blamed inflation on global factors such as the war in Ukraine, the continuing effects of the pandemic and the rise in global oil prices. He did not mention at all the fact that the Agricultural department has been helpless to deal with the disruptions said to be caused by cartel price manipulation — the supply of food, such as rice, sugar and vegetables, whose increase in prices has been the main cause of inflation. Not a word from Marcos on the very first move necessary to have a functioning Agriculture department — which is to let a full-time secretary, not the President in a concurrent capacity, run it. Nobody in this country of 114 million is qualified to head that department?

With regard to our huge unemployment problem, Marcos astonishingly spun it to portray it in a positive light: “As of May this year, our employment rate rose to 95.7 percent, clear proof of the improvement from the severe unemployment that we experienced during the height of the pandemic. Employment then was at a low of 82.4 percent.”

And what did Marcos say he’d do to reduce joblessness? He simply said in nine words: “We must do more. We will generate additional jobs.”

Maybe Marcos knows that a SONA isn’t really about telling the people how stands the nation. It’s simply an annual political ritual in which opportunistic legislators, bureaucrats, the favored faction of the elite at the moment, and even journalists — dressed in their best — pay homage and allegiance to the president.

---

Facebook: Rigoberto Tiglao

Twitter: @bobitiglao

Archives: www.rigobertotiglao.com

Book orders: https://ift.tt/6qzwFeZ

The post Is the state of the nation really sound? first appeared on Rigoberto Tiglao.

Is the state of the nation really sound?
Source: Breaking News PH