PH economy takes a turn for the ambiguous
Ben D. Kritz
ONE of the most annoying things about reading many analyses of the Philippine economy is that more often than not, they are framed according to the political perspective of the analyst. Many formal analyses provided by economists and economic or financial organizations fit this pattern, as do virtually every one of the local media’s less formal business and economic pundits.
As a result, nearly every conclusion is foregone, depending on the preconceived view of the country’s current leadership. An analyst who sees President Duterte as “erratic and crass” will highlight economic indicators that suit that characterization, while local opinion-shapers, for the most part, will find creative ways to explain that the sky is burning because it’s actually a blessing conferred on the nation by the profound wisdom and inscrutably noble determination of the current tenant of Malacañang.
This makes most economic analyses completely useless because any economy is inevitably a system of balance. It’s rare and actually undesirable for all useful measures of economic activity to be positive or negative because that indicates a short-lived and unstable condition. An excessively positive economy will quickly collapse into a negative one and an excessive negative economy will generally collapse into something even worse. Thus, in a relatively normal economy, an analysis trying to support a preconceived political notion will either have to omit some indicators that would counter its thesis or acknowledge enough of those to render the analysis contradictory.
An example of this was a report by London-based Capital Economics made public this week, which warned that the economy may “take a turn for the worse” if investment slows and the government can’t keep the negative effects of its infrastructure spending drive under control. In making that argument, Capital Economics cited some indications those hazards are already being realized: The stock market has dropped sharply, foreign direct investment pledges have declined, inflation is at its highest level in seven years, and a sharp increase in the import of capital goods attributable to the government’s infrastructure spending has caused the deterioration of the Philippines’ current account position and helped to depreciate the peso.
The current state of the economy is being hampered by the “erratic and crass leadership style” of President Duterte, under whom “improvements to the business environment appear to have ground to a halt.” This is in sharp contrast to his predecessor, Capital Economics points out, during whose term political stability was restored, thanks in large part to an “absence” of military coups and corruption scandals.
Making a credible attempt to acknowledge the entire economic picture, Capital Economics also noted that on the other hand, Duterte hasn’t been “a disaster,” partly because he had the good sense to leave economic policy “in the hands of technocrats who have pushed through a number of sensible reforms” while overall economic growth “has remained strong.”
So which is it? Is the economy in danger or not? In the end, Capital Economics couldn’t seem to make up its mind and thus provided the unhelpful conclusion, “The upshot is that while growth is likely to remain strong in the short term, helped by a combination of rapid credit growth, strong global demand and big increases in government infrastructure spending, the risks to growth are on the downside.”
Oh, for crying out loud. The risks to growth are always on the downside, that’s what makes them “risks.” Risks are a constant, one way or another. That’s not new information. So as a result of the focus on the largely irrelevant thesis “Duterte is rather distasteful,” we know no more about the current state and likely direction of the economy after this report than we did before.
Now, or for that matter, at any discrete point in time, there are advantages and flaws in the state of the economy, and if one could gather enough economic indicators, those that defined one or the other would exist in roughly equal numbers. What investors, entrepreneurs, ordinary consumers, and policymakers really need to know is for what parts of the economy certain conditions represent an advantage or disadvantage, to what degree, and how that might change within some useful period of time. At this point, nobody seems to know any of those things, and the only explanation for it is that almost nobody seems to have the capacity or inclination to disregard ideology and personality and look at economic factors in an objective way.
Until someone can, the Philippine economy is likely to remain an enigma that rolls along as a matter of inertia rather than coherent management, not doing too poorly, but not nearly living up to the potential it needs in order for 100-plus million people to prosper.
ben.kritz@manilatimes.net
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