For the Record
On Q1 2004 Economic Performance of the Philippines
This article seeks to clarify some misconceptions and concerns about the national accounts including those cited in the 01 June 2004 column of Mr. Conrado R. Banal III, “Breaktime”, in the Philippine Daily Inquirer on the performance of the economy during the first quarter of 2004.
Statement: “…. the manufacturing sector was severely down, following the death of countless factories in the hands of the government.”
Based on hard data, the manufacturing sector was not really down. For 2002 and 2003, it grew by 3.5 percent and 4.2 percent respectively. For the first quarter of 2004, it registered a growth of 4.3 percent. The Integrated Survey of Households (January round) of NSO shows that employment in the manufacturing sector increased by 12.3 percent during the first quarter of 2004.
Statement: “In the services sector, moreover, the biggest provider of jobs –the construction industry—also suffered from years and years of sluggish business.”
Construction is classified under the Industry Sector, not services sector. While it is true that construction has not performed well starting 2001, it has been showing signs of recovery as it grew by 6.5 percent in Q1 2004, following a marginal growth of 0.3 percent a year ago. In fact, for the first quarter of 2004, hard data on the construction sector from the Labor Force Survey of the NSO show that employment grew by 8.3% while total hours worked grew by 11.1%. On the other hand, the Services Sector, which includes transport, communication and storage; trade; finance; ownership of dwellings and real estate; private services and government services, has been consistently doing well. In 2002 and 2003 it grew by 5.1 percent and 5.8 percent, respectively. In the first quarter of 2004 it posted a growth of 6.4 percent.
Statement: “That left the Philippine economy with just agriculture, which the NSCB announcement said carried the entire economy to an impressive victory in the January-March quarter.”
Table 14 (Indicators Derived from the National Accounts, page 23) of the May 2004 National Accounts publication shows that out of the 6.2 percent growth of GNP, services contributed 2.7 percentage points while industry and agriculture contributed 1.7 and 1.5 percentage points, respectively. The remaining 0.2 percentage point came from the Net Factor Income from Abroad (NFIA). Services has the largest share of 42.80 percent of total GNP while agriculture accounts for only 19.94 percent.
Statement: “The only problem would be, since agriculture did well, there would be a lot of food…. The price of pork, chicken and vegetables recently went up so high that many of us could not afford to buy them…. Last week, for instance, as the NSCB proudly announced its numbers, pork was doing 140 pesos per kilogram. Pork used to sell at only 115 pesos a kilogram before the agriculture sector supposedly saved the country from certain economic ruin with its robust farm production in the January-March quarter.”
The Gross Domestic Product or GDP that we publish is the value of all goods and services produced within the domestic territory for a specific period of time. The Gross National Product (GNP) on the other hand is GDP plus the Net Factor Income from Abroad (NFIA), which is composed of net compensation plus net property income. As such, the growth in GDP and GNP denotes the performance of the economy at the macro level. They are indicators not meant to measure human welfare. Economic growth as measured by the GDP/GNP does not always translate to a better life for everybody. Thus, the challenge to planners and decision makers is to foster growth and to have this growth shared equitably by the different sectors of society.
In terms of growth, Livestock had a favorable performance in 2003 with annual growth of 3.0 percent, which further improved to 3.4 in the first quarter of 2004. In terms of prices for 2003, CPI for Food remained relatively stable however, CPI for meat, which had inflation rates of –0.9%, -0.2% and 0.9%, respectively, for the first three quarters of 2003, increased by 3.0 percent in the fourth quarter. For Q1 2004, CPI for meat increased by 11.1 percent with the CPI for chicken and pork increasing by 14.0 percent and 13.0 percent, respectively.
Though there were increases in the Gross Value Added (GVA) of Livestock, prices also went up since the price of corn (corn is a major component of feeding stuff), a primary input to the livestock industry, went up. Based on the price data of the Bureau of Agricultural Statistics, prices of corn moved up by 6.3 percent in the Q4 2003 and by 34.9 percent in the first quarter of 2004.
Other Clarificatory Notes on the National Accounts Estimates:
In the compilation of the Philippine System of National Accounts, the NSCB adheres to guidelines developed by experts from all over the world. The latest version of these international guidelines, the 1993 System of National Accounts (SNA) was prepared jointly by the United Nations (UN), International Monetary Fund (IMF), World Bank (WB), Organization for Economic Cooperation and Development (OECD), and the Commission for the European Communities (CEC). The Philippines through the NSCB has received delegations from various countries including Bhutan , Brunei , China , India , Indonesia , among others to share their own and learn from the Philippine experience in the compilation of national accounts. National accountants from the Philippines (NSCB) have in fact provided consultancy services to several countries in the Asia Pacific region.
The national accounts estimation process entails putting together data from various sources (surveys, administrative records, financial and sales data from business firms). Thus, the quality of the national accounts estimates depends on the quality of data provided by establishments and individuals responding to surveys and censuses. If establishments refuse to cooperate with their data inputs, the quality of the estimates naturally suffers. In addition, since our data come from different sources, in our compilation of the national accounts, the NSCB sector specialists perform a validation process which looks into the consistency of the estimates vis-a- vis demand and supply as well as outputs and inputs.
Reference should also be made to the Technical Notes on the Philippine System of National Accounts (PSNA) that we regularly publish in our website.
Economic Statistics Office
For inquiries please contact Dir. Raymundo J. Talento at (632) 895-2481 or e-mail him at email@example.com.
Posted 22 July 2004