Last year, right after the government had happily reported that economic growth in the second quarter of 2014 had accelerated to 6.4 percent per year, I warned against being misled by the official System of National Accounts (see “The economy grew—so what?”, Opinion, 9/16/2014). As basis, I cited the latest SWS surveys on poverty and satisfaction with life, which were not too rosy at that time.
But now the situation has turned right around. Last week, the National Economic and Development Authority was disappointed to report that the GDP grew in the first quarter of 2015 by 5.2 percent from the previous year, saying it was “lower than what the government and the market expected for the period.” For the government, missing its GDP forecast implies collecting less than it projected from taxes on various types of production, income and trade. It is disappointing for the Department of Finance.
What “the market expected” refers to what those in the financial sector expected. The reason the big banks like to do their own GDP forecasting is this: Bigger GDP means bigger business for the sector that makes money out of the transactions in all other sectors. According to a finance expert, the Neda announcement sent the main stock index down 1.6 percent in morning trade. Stock market players suffered losses, on paper.
The economy slowed down—so what? Does it follow that the Filipino people as a whole were adversely affected by the slowdown in economic growth? First of all, few know what the acronyms GDP and GNP stand for, and fewer can distinguish between the two. Even if told about the slowdown, only a few, I think, would have noticed any effect on them. More importantly, the people weren’t badly off in the first quarter of 2015, as a matter of empirical fact.
Last week I reported that, in March 2015, Optimists minus Pessimists about next year’s Quality of Life (QOL) hit a new high, while Gainers minus Losers relative to last year’s QOL hit second best, in the entire survey history (“All-time high personal optimism,” Opinion, 5/30/15).
The week before, I reported that the March 2015 hunger rate of 13.5 percent of families “is not only the second consecutive quarterly decline … but, more significantly, is the lowest quarterly rate in the past ten years…” Also, March 2015 had “51 percent of household heads rating themselves as mahirap (poor) in general, and 36 percent rating the food they eat as mahirap. The new self-rated poverty number is only one point below, but the new self-rated food poverty is five points below, the December 2014 level” (“Some relief for the deprived,” Opinion, 5/16/2015).
On May 1, SWS posted its finding that “the First Quarter 2015 Social Weather Survey, fielded over March 20-23, 2015, found adult joblessness at 19.1%, … [or] the lowest since the 18.9% in September 2010” (see BusinessWorld, “Fewer Filipinos unemployed—SWS,” 4/28/2015; by “joblessness,” SWS means walang trabaho, which is more akin to official “underemployment” than to official “unemployment”).
Why watch GNP/GDP at all? By accounting principles, the aggregate value of goods and services produced is equal to the aggregate earnings of those engaged in producing them. Thus the entire economic pie could be measured, in principle, either from the production side or from the earnings side, with the same result.
Now, it so happens that measuring the totality of production is much easier than measuring the totality of earnings, because the population of production entities (farms, factories, other businesses, government units etc.) is much smaller than the population of earners (workers, capitalists, landowners etc.). Surveys of production units, which can tell how much value was produced, of what, are done quarterly, to enable quarterly reporting of GNP/GDP.
The official System of National Accounts now uses “Gross National Income” instead of Gross National Product, since it gets GNI from GDP by adding inward remittances from Filipinos/Filipino companies abroad (and in principle the outward remittances of foreigners/foreign companies based here should be subtracted).
The new official report says that the Gross National Income per Filipino in 1Q2015 was P36,884 of current value. At roughly five persons per household, over three months, that comes to more than P61,000 per household per month. That’s not bad, if households got the entire pie, and if everyone got an equal share of it. It’s estimated as 4.3 percent higher, corrected for inflation, than in 1Q2014.
After removing what the government and corporate sectors kept for themselves, the remaining pie available for households to consume in 1Q2015 was reportedly P22,614 of current value per capita. At five persons per household, over three months, that allows P37,690 of consumption per household per month, if shared equally. It’s put at 3.6 percent more, in real terms, than in 1Q2014.
But how equal is consumption? How much goes to high-end items and how much to wage-goods (i.e., what workers need)? The surveys of production that underlie GDP/GNP cannot answer these questions.
Surveys of incomes are more relevant to wellbeing since they can tell how much was earned, by what people. But these surveys, which can distinguish the rich from the poor, are much too seldom.
From the SWS quarterly data, there is little sign that the poor have been affected by GNP growth from quarter to quarter, or from year to year. In the longer run, perhaps, since poverty did fall in the 1990s. GNP would be a means, not an end.
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Contact mahar.mangahas@sws.org.ph