If you torture data long enough, it will confess to anything,” British economist Ronald Coase once said. The current state of the local economy, for example, is such that it offers a wealth of empirical data to buttress the arguments of anyone in the political spectrum—hardliners, pundits and social media trolls alike. Depending on which side of the political fence one is on, information can easily be picked out, and picked apart, to ascribe credit or blame to whichever presidential administration one supports or opposes.
On the issue of foreign investments in the Philippines, several quarters have expressed alarm over the flight of capital that appears to have been happening in recent months. In particular, the Philippines’ balance of payments, which represents the aggregate net value of the country’s transactions with the rest of the world for goods and services, now stands at a deficit of $3.26 billion in the first half of the year. With only six months’ worth of transactions having been tallied, the Philippine economy has already spent more than twice what the central bank was expecting for the entire 2018.
Malacañang critics also like to highlight the 58-percent drop in investment pledges in the first four months of 2018, as reported by the Philippine Economic Zone Authority (Peza), as evidence that things are looking south for the country. Both dollar outflows and the decline in pledges are also seen as worrisome indicators.
But there may be equally compelling data in the other direction. Consider the country’s foreign direct investments: During the first full year of the Duterte administration, foreign direct investments hit an all-time high of $10 billion. These long-term investments continued to surge during the first fourth months of the year, rising by 24 percent over last year’s figures.
Lobbing credit or blame for political one-upmanship is, of course, a much less useful exercise than actually taking stock of all these diverse, sometimes contradictory, information and using them to formulate or push for policies that will improve the lives of Filipinos, many of whom have no use for technical economic talk in their daily grind to make ends meet and put food on the table.
Is the Palace doing enough, for instance, to mitigate the inflationary spike, which the Duterte administration’s economic managers had said was “unexpected” but which is now generating mounting anxiety across much of the public? According to a Social Weather Stations (SWS) survey last June, 48 percent of Filipino families rated themselves as poor in the second quarter of 2018, a six-point jump from the number in March. That translates to around 11.1 million families. “The SRPTs (self-rated poverty threshold) for Mindanao, Balance Luzon and Metro Manila are at record-highs,” SWS said.
Is the administration doing enough as well to address other possible red flags in the economy? If the dollar spending can’t be helped, are policymakers implementing measures that will help the country earn more dollars by improving the competitiveness of the export sector?
As for the investment downturn, the government can draw in more investments by making sure that policies are stable and transparent; what’s the Philippines’ score again in that regard? Peza pledges should improve under such an environment. Public and private stakeholders, too, must be enjoined to work together to ensure that the economy continues to grow, and thus remains a good bet for investments.
While most foreign observers foresee continued growth for the Philippine economy, these early warning signs—inflation, depressed investment pledges, dollar outflows—appear to point at problems that need to be addressed urgently to stave off the possibility of bigger crises.
But there is one other, more unpredictable, element at play: politics. Echoing the concerns of many independent economists and thinkers, Moody’s Investors Service recently warned that the administration’s planned shift to federalism will be a “downside risk” to the economy. It added that “the Philippine president’s contentious policies on law and order over the past two years as well as other political controversies may have a negative impact on the Philippines’ attractiveness to financial and physical asset investors.”
In other words, if the country doesn’t look out, politics, in the end, may yet again prove to be the economy’s undoing.