Wednesday, August 31, 2011

When economists use crystal ball

Dear insansapinas,
Fearless forecast is not the same as the actual economic growth. Kaya nga forecast eh. So my eyes rolled when I read this article of an economist.columnist and a former NEDA Director.

I thought of waiting till next week to write this piece on the general state of the Philippine economy. After all, the National Statistical Coordination Board will only announce the official economic growth data for the second quarter tomorrow. Even so, the National Economic and Development Authority has already come out with a “fearless forecast” growth of around 5 percent for the second quarter (that is, from April to June) of this year. If correct, then the growth in the first quarter would have been sustained or even slightly improved upon.
And even if the economy grew by 5 percent, it cannot indicate growth not until it is compared with the past growth rates.  Para bang, o ayan tumaas ang GDP ng 5 per cent, lumago ang economy na kung titingnan mo yong nakaraan ay 8 per cent pala ang taas. Growth rate  ba yon?

Eh lumabas na nga ang actual growth rate na nirelease ng NSCB. Mas mababa pa sa 5 per cent. Anong ginamit niya crystal ball?

He has the pitik test. Siguro yong pitik-bulag. Read on.
My regular readers would know that three vital yardsticks make up my reliable “pitik” test for the economy: presyo (prices), trabaho (jobs), and kita (income)—hence the PTK mnemonic. And surveys tend to show that ordinary people consider these three indicators as most important, in that order.
Let’s start with prices, then. Prices generally go up through time; in fact, one should worry when they generally go down as this reflects a weakening economy. This had been the case in Japan for well over a decade. The relevant question is, how fast are prices moving up? The latest reported annual inflation rate is 4.3 percent, slightly higher than the 3.9 percent last year, but actually slower than in some of our more dynamic neighbors of late. The good news is that food price increases have been slower than overall, suggesting that inflation is not hitting the poor (for whom food is the dominant part of their budget) as hard as the rest. Economists also make a distinction between “headline” inflation and “core” inflation, where the latter excludes prices of price-volatile items like energy and food, thereby being a better measure of fundamental price stability. There is good news here as well: core inflation is actually much lower (3.6 percent), and actually lower than last year (3.9 percent). After all, price rises in the past months have come mainly from oil price increases, which are global in nature and largely beyond our control.
Siya lang yata ang hindi nababahala sa inflation aka increase in prices kasi raw hindi pa lumampas sa target rate.
Why does BSP require an increase in the reserve requirements in the banks, then ?

Ginagawa lang ito para macontrol ang pera na nasa circulation to check inflaion.

Sabi nga sa balita:
The central bank said last month that the growth prospects for the economy remains bright, while admitting that inflation is a major risk.

The bank was of the view that sustained foreign exchange inflows, driven by upbeat market sentiment over the brighter prospects for the Philippine economy, could accelerate build up of domestic liquidity. This in turn could pose potential risks to inflation, the bank said during its latest monetary policy meeting in July.
Bangko Sentral ng Pilipinas kept its benchmark overnight borrowing rate steady, but raised the reserve requirement rate for banks for a second consecutive meeting, citing upside risks to the inflation outlook.
In conclusion, he wrote:
What about jobs? The latest official jobs data show that over 1.4 million net new jobs were generated in the year between April 2010 and April 2011, well exceeding the average of one million new workers who join the labor force yearly. As a result, the unemployment rate fell to 7.2 percent from last year’s 8.0 percent, which is a substantial drop. Thus, there is good reason to expect that the GDP news tomorrow will be upbeat, and will certainly not disappoint.
On balance, then, we can say it’s so far, so good for ‘Aquinomics’— and that is probably an understatement.
 Indeed the unemployment rate has gone down from 9 per cent. Thank the women in the workplace.

Who will even bother to read the article and the news about the economy? So kahit anong sabihin niya hindi maiintindihan ng masa?

Learned people such as James Soriano should know that 4 per cent is lower than 8 per cent. Noh?

No comments: