Business World, 12 November 2013


Every crisis offers an opportunity. The recent crises — the Zamboanga armed conflict, the Bohol-Cebu earthquakes, and killer typhoon Yolanda — are no different. Even as the entire nation mourns the dead and as it sympathizes with the 9.5 million Filipinos affected by these calamities, the government should seize the opportunity to plan and execute such plans to build stronger, safer and more sustainable communities in the affected areas.

Even before these crises, the emerging consensus among international lending institutions — the International Monetary Fund (IMF), the World Bank (WB) and the Asian Development Bank (ADB) — is that economic growth will decelerate in 2014. On Oct. 8 this year, the IMF forecast that the Philippine economy will expand by 6.8% in 2013 and 6.0% in 2014. The World Bank forecasts growth of 7.0% in 2013 and 6.7% in 2014, while the ADB forecasts growth of 7.0% this year and 6.1% next year.

By contrast, the Philippine government had a slightly more optimistic forecast: growth of 6.0% to 7.0% this year and 6.5% to 7.5% next year.

Of course, a policymaker or an ordinary citizen may opt to believe what he wants to believe. He might believe that the economy will continue to zoom or he might believe that it will edge down slightly or even sharply.

An error in one’s assessment of economic growth may have serious personal consequences. For example, if a consumer were to believe the government’s optimistic forecast, he may choose to continue to consume rather than save for a rainy day. But if the economy in fact turned for the worse, the consumer who failed to anticipate the downturn may be in serious trouble.

On the other hand, if the government were “truthful” in its economic forecast, and the ordinary man in the street took the government’s economic prognosis as basis for his behavior, then he would be well protected. He will consume, save and invest accordingly.


This is where “true” and accurate government-provided data and analysis take the nature of a public good. For the ordinary citizen, accurate and correct economic data are hard and expensive to come by. Hence, he has no choice but to rely on government gathered and issued economic data.

A responsible government has to provide its people an accurate picture of the state of the economy. In recent months, the Aquino administration has been hyping that the Philippines is the fastest growing economy in the ASEAN-5 region. But that’s about it. It’s purely hype, since the Philippine’s growth performance is largely because it is starting from a low base.

The harsh reality is while the Philippines has grown the fastest in the last four quarters, it has remained the most impoverished among its peers. The Philippines’ gross domestic product per person, in dollars, is the lowest among ASEAN-5 economies: $2,587 compared to Indonesia’s $3,557, Thailand’s $5,480, Malaysia’s $10,381, and Singapore’s $51,709.

Moreover, the Philippines ranks the highest in poverty incidence among the original ASEAN-5 economies. Out of 262 countries or territories, the Philippines ranks 83rd with poverty incidence of 27.9. This means 28 out of every 100 Filipinos are poor. Indonesia ranks 133rd poorest country with poverty incidence of 12.0; Thailand ranks 147th with poverty incidence of 8.1; Malaysia ranks 156th, with poverty incidence of 3.8; and Singapore ranks 211th, with zero poverty incidence.

Now, given the numerous catastrophic calamities the Philippines has experienced in the last few months, including the losses in agricultural outputs owing to the series of typhoons in Luzon in August and October, one can expect poverty to worsen, personal wealth to plummet, and public infrastructure to deteriorate further.

The impact of these series of man-made and natural calamities on the economy is huge. To say otherwise is not being truthful.

The optimists among us would see these tragedies as opportunities given the need for massive relief, repair and reconstruction works.


The Aquino administration’s immediate concern should be relief and repair. Reconstruction, which will come later, requires careful planning as new, stronger, and sustainable communities may have to be built.

The ability of society to address these concerns would depend on the capability and willingness of the government and the private sector (banks and financial institutions) to help farmers restart farming, homeowners rebuild their homes, entrepreneurs restore their businesses, and local governments to build better and stronger local communities.

On the part of Congress, it has more than enough time to propose changes in the 2014 President’s Budget. In response to the rising public disapproval of the Priority Development Assistance Fund (PDAF), Congress should scrap totally the full amount (P25.2 billion) for PDAF and use the same to augment the proposed budgets for the Calamity Fund and the Contingent Fund.

The proposed appropriations for the 2014 Contingent Fund is P7.5 billion plus Quick Response Funds totaling P3.350 billion, or a total of P10.85 billion. The Fund may be augmented by P25 billion, for a total new appropriations of P35.85 billion.

The rest of the PDAF, or P200 million, may be used to augment the proposed P1 billion for the Contingent Fund, thus raising its appropriations to P1.2 billion.

But in the remote possibility that the additional P25.5 billion appropriations for the Calamity Fund and the Contingency Fund are deemed inadequate, the Aquino III administration may start preparing for a supplemental budget for fiscal year 2014.

As soon as the legislative work on the 2014 budget is completed, the administration may submit to Congress a supplemental budget. This is the legitimate and proper way of addressing any worse-than-expected calamity or contingency instead of coming up with another ad-hoc, legally flawed, Disbursement Acceleration Program.