Look soberly at higherthan-expected growth

THE latest gross domestic product (GDP) report is something to feel good about because it was robust, and it exceeded the government’s forecast, which tends to be rosier compared to other predictions. But the celebrations should be tempered. GDP does not capture the entire economic picture of the country, and sustaining strong growth in 2023 will be more challenging.

Last week, officials announced that GDP grew 7.6 percent in 2022. The official forecast ranged from 6.5 percent to 7.5 percent, and in 2021, it was only 5.1 percent. The country finished strong in the last quarter of 2022, posting a GDP of 7.2 percent. A Bloomberg poll of economists predicted only a 6.6 percent growth for that quarter.

Of course, posting a high GDP figure is better than a lower number or even a negative one. After all, GDP, the total cost of all final goods and services, is only one of many indicators of economic health.

To base that country’s well-being on that alone would be like assessing a person’s health using only one number.

In examining patients, for example, physicians look at a variety of things, like cholesterol, blood pressure, sugar level and heart rate, among many others. Assessing the economy is done similarly, by looking at several indicators like inflation, unemployment, debt, foreign exchange, et cetera.

GDP does not reflect the quality of growth, like how income is distributed. Income disparity, which is measured by the Gini coefficient, is high in the Philippines. That is why it is common to hear some complain that only the rich are getting richer, even after decades of rapid growth.

According to the latest GDP report, the poor did not fare as well as other sectors. Agriculture grew only 0.5 percent in 2022. It has been under-performing, contributing only about 10 percent to GDP. That is ironic given that nearly half of Filipinos live in rural areas.

Agriculture, along with fisheries and forestry, contracted in the last quarter, according to the government, which blamed severe weather last November. Those sectors’ growth was also slower in the fourth quarter compared to July to September, when they grew 7.6 percent.

Looking ahead The seven-month-old Marcos administration is looking to accelerate growth and poverty reduction. Economic managers plan to bring down poverty incidence to a single digit by 2028.

To do that, the Philippines will have to buck the global trend, which seems to be slowing down. A recession threatens the United States and Europe, where the war between Ukraine and Russia still rages. Worse, fighting seems poised to intensify this year. Fortunately, at least according to the Economist Intelligence Unit, inflation in the West might be easing.

China, which has become this country’s largest trading partner and a major source of investments, might be sluggish this year as it recovers from its draconian measures to contain Covid-19. But the positive development is that it has eased restrictions and reopened. Still, more than 40 economists surveyed by Reuters predicted that China’s GDP will grow only 2.8 percent in 2022. This year, their outlook is 4.9 percent.

Even so, the Philippines is confident about maintaining a high-growth trajectory, Socioeconomic Planning Secretary Arsenio Balisacan told reporters last week. The official GDP forecast was reduced to between 6 percent and 7 percent for this year. Initially, it was as high as 8 percent.

Mr. Balisacan also said GDP could have been even higher this year, if not for the high inflation. It spiked to 8.1 percent in December, a 14-year record. For the full year, inflation was 5.8 percent, which was also higher than the official forecast.

Recently, the government released a new development plan, which prioritizes the modernization of agriculture to make it more productive and to ensure food security. The administration also hopes to improve key sectors, namely services, tourism, as well as information technology and business process management. Plus, the authorities are looking to transform institutions, modernize bureaucracy and strengthen the country’s disaster resilience.

Clearly, much work needs to be done before celebrations are in order.