IN a gentler perhaps better time, the vast majority of ordinary citizens lived their lives without ever knowing about, much less discussing, ideas such as “GDP,” “interest rate policy” and “economic growth.”
Even a casual glance at any major newspaper and you would have a difficult time missing those topics. It is not that economic news is unimportant. But what do we really know about the economy from what we are given by the government and the press/media?
Read this statement from a well-recognized economic research firm: “The Philippine economy grew at an annual 6.8 percent year-on-year in the March quarter of 2018, following a downwardly revised 6.5-percent expansion in the previous quarter.” What exactly does that mean? Is that good, bad or neutral? What impact does that “fact” have on the lives of average Filipinos?
The reality is that these numbers fall into one of the categories of the wise old saying that no one remembers who first said it. “There are three kinds of lies: lies, damned lies and statistics.”
Any time any government anywhere releases economic data, the “opposition” immediately turns it into a political issue. The growth is not large enough. The growth is not “inclusive.” The growth is not sustainable. Of course, the sitting government responds just as politically with “No, you are wrong!”
Assume for a moment that the economy can accurately be measured. By the way, that is a huge assumption. Initially, what do we measure as “economic growth?” Do we count all the income made by individuals and companies? Should we count all the spending by individuals and companies? Alternatively, do we measure the production such as how many kilos of palay were grown or how many kilowatts of electricity was produced? Should we use some sort of combination of these?
The economic experts tell us, “No problem. We have it all figured out.” But the truth is, their expertise is nothing more—and nothing less—than a judgment call as to what they think is an accurate representation of the economy.
Then comes the question of how we value all this. The production cost, for example, of electricity changes constantly as does the selling price. Do we value the production cost of a pig, the farm-gate price to the farmer, or the retail price of a kilo of crispy pata at our favorite restaurant? Yet, it gets even more complicated.
For the first quarter of 2018 the total “value” of the economy—according to the Philippine Statistics Authority—was P2.15 trillion. But that is “at constant 2000 prices,” meaning the value of pork is computed at the per kilo price in 2000. “At current prices” the total value of the economy is P3.92 trillion. Both numbers are “accurate” but it is not the same as giving your weight in kilograms and pounds.
However, in order to make national comparisons, most research converts a nation’s economic value into US dollar terms. Based on average exchange rates, the Philippine economy in 2017 was worth about $352 billion.
If we measure economic growth based on nominal numbers in US dollars, the economy grew by 76 percent between 2010 and 2017. Using the Famous Big Mac Index, based on the number of Big Macs the total economy could buy in 2010 versus 2017, the economy grew by 50 percent. Based on a per-capita basis—dividing the economy by the population—the growth was 32 percent.
How is the economy really doing? It all depends on what statistics you care to look at.