Is the worst over?

A high official of the National Economic and Development Authority certainly thinks a case can be made for saying so. Key indicators suggest that “the worst seems over … for the Philippine economy,” said NEDA Deputy Director General Rolando Tungpalan the other day.

We are not too sure, and would recommend, in the matter, an excess of caution rather than a rash dose of premature optimism.

The NEDA can certainly point to some encouraging signs. It is possible that the US economy, our largest trading partner, may recover from its deepest recession in generations before the end of 2009. Almost 100,000 jobs abroad are available to Filipino applicants, according to Tungpalan. Export firms in Cebu are beginning to re-hire laid-off workers to meet increasing demand. And, not least: “Inflation is now down to 4.8 percent. It is rapidly falling and will boost personal consumption.”

The NEDA is not alone in the silver-lining business. The other day, the Bangko Sentral asserted that remittances from overseas contract workers, which last year reached a record $16.4 billion, “are expected to be steady and will continue to drive consumption and growth.”

The statements from NEDA and Bangko Sentral experts are valuable precisely because, while they are policy-making agencies of government, they are perceived to be scrupulously non-political. But we cannot help but think that these agencies have been doing some cheerleading for the Philippine economy, perhaps without being aware of it.

We can certainly understand their dilemma: How does one signal to investors and consumers alike that the fundamentals remain sound, without inspiring or adding to a sense of complacency? How does one encourage businessmen and employees alike to use the global financial crisis as a rare opportunity to cut costs or add to one’s savings, to re-engineer processes, learn new skills, reinvent ourselves—without fostering a sense of panic? It’s a difficult balancing act (one that other governments, too, are finding tricky).

One possibility for the Bangko Sentral and NEDA and other such agencies is to stick to the statistics—and tone down the rhetoric.

Tungpalan’s conclusion, for instance, that “the worst seems over” may or may not be justified by the economic indicators. The point is, perhaps it was not for him to say so.

We can point to other indicators which can lead a reasonable observer to the opposite conclusion.

On exports, Tungpalan referred to the uptick in monthly export earnings as “indicating signs of the easing recession in trading countries.” It’s true that the March 2009 figure was 15.9 percent higher than the February 2009 figure—but it was also 30.9 percent less than the March 2008 total. In other words, we aren’t anywhere near last year’s numbers.

Net foreign direct investment fell by a dizzying 82 percent in February. That is to say, the net inflow of $90 million recorded in February 2008 fell to $16 million—just about what boxing icon Manny Pacquiao stood to earn from his demolition of British fighter Ricky Hatton—in February 2009.

Remittances, one of the economy’s main engines of growth, depend on the number of Filipino contract workers deployed abroad. According to revised (and partial) figures from the Philippine Overseas Employment Administration, the number of newly hired land-based workers deployed abroad in 2008 went down by almost 30 percent from 2007. To give only one example: Saudi Arabia, the usual top destination, hired 20,000 fewer Filipinos last year than it did in 2007.

What this partial revision does is put into question the estimate that a total of 1.3 million Filipinos are working overseas. As an industry consultant told the Inquirer: “I think it’s impossible to have 1.3 million total deployment if the markets of new hires actually declined and no new major market opened up in 2008.”

Of course, it may well be true that in the global financial crisis the country has already turned the corner. But it is also just as likely to be true that some of the crisis’ economic effects have not been felt in the Philippines yet. We should have a better idea in the next few months. But in the meantime, it seems to be good policy to assume that the worst is not yet over. To say otherwise is to invite complacency. –Philippine Daily Inquirer