The statistic that economic analysts and financial managers are anxious to learn more than any other is the answer to the title of this column. How fast did the Philippine gross domestic product grow last year?
At the beginning of 2014, forecasting the rate of growth of this country seemed to be an easy undertaking. But as the year progressed, that became less and less the case.
With the Philippine GDP having risen by 7.2 percent in 2013 and by close to 7 percent in 2012, it seemed entirely rational for economic forecasters and financial analysts to venture a GDP growth rate of approximately 7 percent in 2014. The majority of the forecasts of the international financial institutions and commercial banks – domestic and foreign – clustered around the 6.5 percent high end of the National Economic and Development Authority’s GDP growth rate forecast. Numerous forecasts were in the neighborhood of 6.5 percent to 7 percent.
The authors of those sanguine forecasts saw no reason for believing that the 2014 GDP growth rate would not approximate, or would diverge substantially from, the 7.2 percent 2013 growth rate. True, the much-sought-after acceleration of the Public-Private Partnership program was still not taking place, but inflows of overseas Filipino worker earnings remained strong, fueling high levels of consumer expenditures – these account for around two-thirds of the nation’s GDP – construction activity and real estate-related production. Merchandise exports were holding up and the business process outsourcing industry was maintaining its expansion.
But as 2014 approached mid-year, a softening could be discerned in the tone and tenor of the GDP growth forecasts emanating from the international financial institutions and elements of the world banking community. Now, no institution was talking about a replication of the Philippine economy’s 2013 performance and more and more financial institutions were offering scaled-down growth forecasts.
After midyear, most of the forecasts were moving from the 7 percent area to the vicinity of 6.5 percent, and as the year drew to a close, the forecast norm had become 6 percent to 6.5 percent.
Undoubtedly, the biggest factor in the progressive downgrading of Philippine GDP growth forecasts for 2014 was the substantial decline in government non-consumption spending in the wake of the public disclosures of corruption-tainted and illegal government spending on infrastructure projects. The sharp cut in such spending is believed to have been responsible for the GDP growth slowdown in 2014’s third quarter, and while the government played catch-up in the final months, the last quarter of the year likely will still register a lower GDP growth rate. The fourth-quarter growth figure will be largely determinative of the character of the economy’s full-year performance.
How well – very well or only moderately well – is the Philippine economy likely to have performed last year? Will it have grown by between 6.5 percent and 6.7 percent, as a number of institutions were courageously forecasting at yearend? Will it have grown by between 6.3 percent and 6.5 percent, as other now-less-bullish banks have suggested? Or will the economy’s 2014 performance turn out to have been closer to 6 percent?
Economic forecasting is never easy and always risky, and forecasting how the Philippine economy performed last year is no exception. But I will go where angels fear to tread. Under the circumstances discussed above, I am inclined to believe that the economy grew by around 6.3 percent in 2014.
E-mail: rudyromero777@yahoo.com