Thursday, June 28, 2007

Philippine Quarterly GDP Growth Dashboard: 1Q 2004 to 1Q 2007

Putting the NSCB's time series data in a graph can help give a clearer picture of the sources of GDP growth during the past thirteen quarters. Using the Expenditure approach, GDP is computed as the sum of Personal Consumption Expenditure (pce), Government Consumption (gc), capital formation (cf) and exports (x) less imports(m). Using the following color codes to assign the quality of growth as follows...

...we can more readily see where the sources of gdp growth for a given quarter is coming from:
GDP Growth: Expenditure Approach (click on image to enlarge)

The above shows that the exceptional (by Philippine standards) growth for the first and second quarters of 2004 was a result of doing well on all categories (especially personal consumption). In comparison, the recently reported 6.9 percent growth is due mostly to government expenditure and a drop in imports (which resulted in a better trade balance). Since government cannot go on spending beyond its means and since imports cannot drop without affecting over-all economic activity (unless replaced with local substitutes), it is clear that we have to do better in the other categories if we are to sustain the pace of economic growth.

Here's another perspective, i.e. in terms of growth per sector...

We can only hope that the 9.1 percent services growth is not a one off spike due to election-related spending and that industry growth will not slow down due to the drop in imports.

Update July-02-07 11:00pm: Yesterday's edition of the has former Socioeconomic Planning Secretary & National Economic and Development Authority (NEDA) Director-General citing the analysis of his fellow former NEDA Director-General Felipe Medalla that...
" puts to question the very claim that the economy's recent growth has never been better in the last 17 years".
Medalla's analysis, while similar to mine, goes further. He also picks up on the observed slow down in imports that i mentioned above. Specifically, Habito states that...
"In essence, Medalla observes that the recent growth rates of GDP and GNP are made higher by the fact that import growth rates have been much slower than they had been before."
The two candidate factors being considered to account for this lack of import growth are (1) a greater degree of import substitution during the Arroyo years compared to FVR's time, and (2) "the increased dominance of the Services Sector" (which is not as dependent on imports) in the Economy. To clarify this matter, Habito says that the concerned statistical agencies have to go ahead with their...
"planned and long-overdue comprehensive review of their methodologies."
A third possibility which Boo Chanco points out is Peter Wallace's claim that...
"maybe the numbers are mistaking smuggled inputs and goods as domestic...[which] sounds plausible given that there has been no marked increase in domestic productive capacity in recent years."
Of the three possibilities, the third one seems to be in keeping with what we know about the present state of our society so if i were a betting person, i'd place my money on increased smuggling distorting the GDP statistics. Of course, definite conclusions have to await the arrival of credible data which in turn awaits the departure of Gloria Arroyo's confidence-men.

Update Sep-03-2007: Here is an updated dashboard which includes the 2nd Quarter 2007 figures.

*Very Good means that growth rate for a given period is greater than the median growth rate for the periods considered by equal or more than one standard deviation.
**Good means that the growth rate for a given period is equal or greater than the median growth rate for the periods considered.
***Poor means that the growth rate for a given period is less than the median growth rate for the periods considered.
****Very Poor means that growth rate for a given period is less than or equal to one standard deviation below the median growth rate for the periods considered.
*****x-m is exports 'x' less imports 'm' which gives the trade balance for the given quarter.

No comments: