This article seeks to clarify some of the points raised in the newspaper article “Reliability of government economic data questioned” written by Mr. Felipe F. Salvosa II which came out in the 4 July 2007 issue of Business World. We would not wish to comment on the theories and expectations as to how the economy should be performing; this article is written purely from the point of view of the compiler of the national accounts of the Philippines.
Business World statement
“Calling on government statistical agencies to disclose how data on economic output is being generated, UP economist Felipe M. Medalla – National Economic and Development Authority chief during the Estrada administration – pointed to inconsistencies between the national accounts, or the estimates of GDP, and consumer and industry surveys by government statisticians.”
- The NSCB has been very transparent in disclosing how the national accounts data are generated. Through our website (http://www.nscb.gov.ph/technotes/sna) and our regular publications, we provide the public with the System of National Accounts (SNA) Technical Notes and metadata to guide the users in understanding the concepts and methodologies involved in the estimation of the Gross Domestic Product (GDP). The Technical Notes include the history of the PSNA, basic concepts, sources and methods of estimation, country practices, limitations and issues (covers the availability/time lag of data for the quarterly estimates), improvement efforts and the Advance Release Calendar (ARC) of the National, Quarterly and the Regional Accounts for the current year.
- In addition, the NSCB prepares quarterly Technical Notes which are uploaded on our website for a better appreciation of the national accounts estimates for the specific quarter.
- The Sources of Revisions on our estimates are likewise disclosed in our website and in our quarterly publications, following the Policy on Updating the National Accounts (NSCB Board Resolution No. 8, Series of 1997) which explains how the national accounts estimates are regularly updated or revised.
- We invite the public to objectively compare the NSCB practices with those of other statistical systems including those from developed countries.
Business World statement
“There is little evidence to support claims the economy is being lifted by strong consumption growth, while surveys of industries seem to be translating to higher growth in the manufacturing component of GDP when the survey results are positive but not vice-versa, he said”
“… there has been a “significant break” in the relationship between real manufacturing growth in the national accounts and the Monthly Integrated Survey of Selected Industries (MISSI) and the Volume of Production Index (VOPI) of the National Statistics Office, he also said ”
- Although both the National Accounts and the MISSI provide indicators/estimates for the manufacturing sector, as we have pointed out many times in various fora in the past, they measure two different things. The NA gives a more comprehensive coverage of the industry as it includes both the organized and unorganized sectors. The organized sector includes the large (with average total employment of 20 and over) and small establishments which make up about 71 percent of the manufacturing industry. Meanwhile, the unorganized sector covers manufacturing units not accounted for in the NSO inquiries which makes up 29 percent of the total industry. Surely, the “trends” of the National Accounts and the MISSI do not have to be the same !
- In addition, the National Accounts and the MISSI have their differences in terms of the variables whose trend, scope and coverage, data sources, estimation methodology including imputation techniques, deflators, weights, and revision practices/policy are being monitored. For one, the MISSI captures value of production, while the National Accounts measure value added. A more detailed discussion on these differences is available on the PSNA Technical Notes Series, Series 2006-Q2 (http://www.nscb.gov.ph/sna/2006/2ndQ2006/2006tnq_2.asp). This has also been discussed in several fora since 1997, such as: 12th Session of the Development Pulse Forum (New World Hotel, Makati City, 4 September 1997), 7th National Convention on Statistics (EDSA Shangri-la Hotel, Mandaluyong City, 2-4 December 1998), Meeting of the Technical Working Group of the Economic Mobilization Group (EMG) (Department of Trade and Industry, June 2000), Series of meetings of the Joint Government – Private Sector Working Group on MISSI (DTI/NSCB/NSO, January – March 2001), First regular meeting of the NSCB Executive Board, Series of 2007 (National Economic and Development Authority, 14 February 2007), 525 Meeting1/ of the Monetary Board (Bangko Sentral ng Pilipinas, 12 March 2007), Workshop on MISSI/NA – Manufacturing (Le Bea Resort, Calamba, Laguna, 3-4 May 2007) and several bilateral meetings between the NSCB and NSO.
Business World statement
“… there is no evidence of strong consumption growth aside from GDP data, he said, pointing out that in real terms, the link between the national accounts and the Family Income and Expenditure Survey (FIES) conducted every three years has weakened after 1997 and disappeared after 2000”.
- It is not clear to us what “the link between the national accounts and the Family Income and Expenditure Survey (FIES) conducted every three years has weakened after 1997 and disappeared after 2000” means, but the FIES data on expenditures and the PCE estimates are different in terms of coverage, concepts, definitions, methodological and data related differences particularly the underreporting/overreporting of income/expenditures of the FIES. This has been discussed in a number of papers, articles and presented in several fora, such as: NSCB’s Statistically Speaking article entitled “The FIES of the Rich: Truth or Consequence?” which describes in detail the FIES including its limitations (http://www.nscb.gov.ph/headlines/StatsSpeak/121205_rav_fies.asp), NSCB’s For The Record article on “Poverty Thresholds and Income” which provides a comparison of the nominal and real per capita income as released by the NSO and NSCB
Dr. Virola’s presentation during the 43rd Philippine Economic Society Annual Meeting held last 23 November 2005 wherein the differences between the NA and FIES were expounded.
Business World statement
“For government officials to now claim that growth is better than the Aquino administration 17 years ago would be inaccurate as present GDP data has been rendered incomparable to data from 10 or 5 years ago, Mr. Medalla added.”
- As the compiler of the national accounts, NSCB has always recognized the need for the link series. In the past, we were able to produce the link series on a more timely basis; admittedly, we have not done so in recent years due to the severe manpower constraints faced by the NSCB. With the ongoing rationalization program of the government, we have not been allowed to replace a number of staff who retired/transferred to institutions like the Bangko Sentral Ng Pilipinas and the Asian Development Bank. We have reiterated our request for exemption from the prohibition and we hope the Department of Budget and Management (DBM) will recognize the need for us to replenish our depleted manpower resources.
- The following are the breaks in the series: (a) 2000-2002 not linked to the 1946-1999 (as of May 2003); (b) 2003-2005 not linked to the 2002 backwards (as of May 2006); and (c) 2004-2006 not linked to the 2003 backwards (as of May 2007). Details of the breaks can be accessed in the Technical Notes Series, Series 2007-Q1 http://www.nscb.gov.ph/sna/2007/1stQ2007/2007tnq_1.asp
Business World statement
“Another former Socioeconomic planning chief, Cielito F. Habito, said he agreed with Mr. Medalla’s findings, and that there’s a need to revisit the methodology of the national accounts.”
- It is the policy of the NSCB to continuously improve the methodology of the national accounts. As a matter of practice, we have been continuously seeking improvements in the coverage and methodology as well as updating our data. Our sector specialists are constantly in search of better methodologies to refine their estimates.
- The methodology used in the compilation of the PSNA is based on a set of internationally accepted standards developed by experts from all over the world through the joint efforts of the United Nations (UN), International Monetary Fund (IMF), World Bank (WB), Organization for Economic Cooperation and Development (OECD), and the Commission for European Communities (CEC). The members of the NSCB staff who compile the PSNA are trained statisticians who have undergone trainings on national accounts here and abroad and have attended international conferences where methodological issues are extensively discussed.
- In recognition of the expertise of the NSCB in the compilation of national accounts, it has been tapped to provide technical assistance to countries like Vietnam, Cambodia, Indonesia, China, and Bhutan among others, in order to develop their quarterly National Accounts.
- We at the NSCB value and safeguard the integrity of our work and we uphold the Fundamental Principles of Official Statistics as promulgated by the United Nations Statistical Commission. We are totally aware of these principles, the third of which states “To facilitate a correct interpretation of the data, the statistical agencies are to present information according to scientific standards on the sources, methods and procedures of the statistics.” Moreover, one of the core values that NSCB adheres to is Professional Integrity which states “We require complete honesty, trust and transparency in everything we do. We are objective and firm on what we believe is right but also open to criticisms and views of others. We make commitments and live up to them. We must maintain independence from political interference and be accountable for what we say and do. We make decisions and produce information founded on scientific research, wide consultation, and professional discussion. We live by the Fundamental Principles of Official Statistics.”
- In line with the NSCB’s continuing efforts to make the PSNA more relevant to the increasing demands of different stakeholders, it is currently working on the over-all revision/rebasing of the current PSNA estimates. The new series is undergoing further refinements in methodology, updating parameters, expanding coverage to include emerging industries, utilizing new data sources and incorporating the recommendations of the 1993 SNA. The over-all revised/rebased series of 2000-2006 is scheduled to be released in December 2007.
Business World statement
“One solution could be to allow the private sector to fund a non-profit think-tank like the National Bureau of Economic Research in the United States, which had produced its own estimates of economic outputs.”
- The NBER, like other research institutions including our own, the Philippine Institute for Development Studies (PIDS) undertakes and disseminates economic researches but does not produce estimates of national accounts. We would like to emphasize that for obvious reasons, it is not a common practice for countries to generate two sets of estimates of the national accounts. This would create confusion and would not be a wise use of our limited resources, just like the experience of Cambodia which produced two sets of NA estimates in the past, but after a while realized that this practice is neither desirable nor efficient nor effective. What the NSCB needs and welcomes would be specific recommendations based on objective, scientific and learned research on how our methodologies can be improved.
The NSCB would like to thank Mr. Felipe F. Salvosa II and the Business World for their interest in statistics and for the challenges they have posed for the further improvement of the Philippine Statistical System in general and the National Statistical Coordination Board in particular. For inquiries, please contact Assistant Secretary-General Estrella V. Domingo or Director Raymundo J. Talento of the National Statistical Coordination Board at telephone numbered (632) 896-4665 and (632) 895-2425, or through e-mail addresses: firstname.lastname@example.org and email@example.com, respectively.
1/ MB meetings conducted to discuss certain issues prior to the regular MB meeting
posted 20 July 2007.