BY MAYVELIN U. CARABALLO, TMT ON MAY 30, 2018, The Manila Times
THE Philippines’ decline in a global competitiveness ranking isn’t “backed up by actual data” but the listing should still prompt the government to work on improvements, a Finance department official said.
“The apparent crash was resoundingly loud, setting off alarms,” Finance Undersecretary Gil Beltran said in a statement released on Tuesday, referring to the 2018 World Competitiveness Yearbook that ranked the Philippines in 50th out of 63 economies, down nine spots from a year earlier.
“But no sooner did the alarm set off did level-headed economic managers hit the snooze button… All these allegations are not backed up by actual data,” Beltran claimed
Swiss business school IMD, which prepared the annual ranking, cited declines in a host of factors such as exchange rate stability, long-term unemployment, the current account balance, protectionism, university and management education and pollution, among others.
Beltran, who is the Finance department’s chief economist, singled out “tourism and employment, worsening public finances and a surge in concerns about the education system” as having been particularly cited in IMD’s press release.
Data released to the media did not cite a tourism score. The rank for public finance, however, fell to 34th from 25th while employment plunged to 32nd from 4th.
The number of employed persons in the country, Beltran said, actually rose by 6.1 percent in January this year and unemployment had fallen to 5.3 percent, the lowest on record.
The Finance official also said that international tourist arrivals increased by 16.1 percent in the first two months of 2018, to 1.4 million visitors, from a year earlier while Philippine tourists hit a record 6.6 million last year.
“[T]he claim that the state of public finance is worsening is simply laughable. The statement by the IMD reflects gross research incompetence,” Beltran added.
“We won’t go to lengths to dispute such statement regarding our fiscal affairs but would like to refer to other third party assessments — credit rating agencies and the IMF (International Monetary Fund),” he said.
Beltran pointed out that credit rating agencies would have already taken notice and downgraded the country’s investment grade score if public finances were really deteriorating.
Beltran also claimed that the IMD failed to distinguish short-term adjustments from long-term prospects and mistook the former for a loss in competitiveness.
For example, he said a current account surplus earned the country a rank of 31st while the following year’s deficit resulted in drop to 41st.
“Using the current account as a measure of competitiveness is like the misguided mercantilist thinking that the greater the surplus, the better it is for the economy,” Beltran claimed.
He said it made no sense to rank economies based on the size of their current account balances relative to gross domestic product if the objective was to assess competitiveness.
“The depreciation in the currency was also noted and was associated with more instability. But textbook economics teaches that a country’s competitiveness improves as its currency depreciates,” Beltran added.
In short, he said the ratings methodology employed by IMD mechanically “ranks cold numbers without understanding the dynamics of the economy”.
Nevertheless, he said the dip in Philippines’ ranking can still be considered a wake-up call for the government.
“We do recognize the real issues such as red tape and insufficiency in infrastructure and we are working hard to address those,” Beltran said.
“We are encouraged by the progress we have made even if these have not been captured by the ratings yet.”