We are on the up trend of the business cycle

Look fellas… I’m not making this up. I attended a briefing by economists from Ateneo and according to them, "the Philippine economy is now on the up trend of the business cycle." And they insist they are not making this up either. Four economists with PhDs made that conclusion with full confidence because that is what the Real Business Cycle model of the Philippine economy they are tinkering with says.

I guess if your financial statements indicate otherwise, you should consider hiring you-know-who as auditors, if only because they must still have the manuals left by Arthur Andersen. You know what magic they can do to your accounting. Before you know it, you won’t feel left out of this positive business cycle.

Actually, the briefing I attended was led by FVR era NEDA chief Ciel Habito who has reincarnated as a Director of the Ateneo Center for Economic Research and Development. Ciel and his group of young PhDs in Economics were sort of launching their new full scale macroeconometric model of the Philippine economy. They tried to show us what it could do.

I am sure you remember Ciel. He is the guitar-strumming, folk song singing economist from Los Baños who surprised us all by declaring his intention to run for President. He actually asked FVR to anoint him instead of Jose de Venecia (who got it) or Rene de Villa (who eventually formed a splinter party to run under).

In so many words, the Blue Eagle economists confirmed government claims that prospects for the economy look good. Agriculture, fishery and forestry and Services sectors have been exceeding growth targets since last year. But the Industry sector has fallen significantly short. The other piece of good news is, all regions of the country are once again contributing to output growth with Northern Mindanao, Bicol and Central Visayas as the fastest growing areas.

The Services sector has been the most positively consistent among the major sectors, and I guess this is thanks in great part to the text revolution in wireless telecoms. The housing and real estate and financial sectors are still in the doghouse. Ateneo’s economic model is also picking up signs that the Industry sector will soon rise from the dead with food and beverage industry showing improved profits. A growth in manufacturing output has also been detected with motor vehicle sales on an uptrend.

Inflation management has been the greatest success of the Arroyo administration, the Ateneo economists say. Inflation rate at 3.4 percent has been the lowest for years. The Ateneans attribute that to the combined effects of favorable agricultural production, trade liberalization and prudent monetary policy. Credit the weather, the WTO and Paeng Buenaventura.

I asked if low inflation wasn’t more a result of low demand because people have little money to buy anything but noodles. Ciel, however, replied that the personal consumption figure is up. The elite couldn’t have skewed this number by overspending at Rockwell and Podium because net transfer payments or OFW remittances are also up and that’s what’s being spent. In other words, our economy is truly OFW driven.

But OFWs will have to stay abroad longer. The Administration, the Ateneo economists observed, is still unable to generate enough jobs to absorb new entrants to the labor force. I wonder whatever happened to those million or so jobs Cito Lorenzo, the President’s job czar claims to have generated. Maybe the Ateneo econometric model failed to catch Cito’s numbers. Cito should send them a copy of his press release, pronto, with a reminder on who spent good money to build Ateneo’s new and modern gym.

Monetary Board member Vicente Valdepenas, the economics professor of President Arroyo also expressed concern about a trend in the agricultural sector to require less workers because of growing efficiency. Where are all those redundant workers going to go?

Where indeed? Not to industry, with its continued generally anemic condition. Services sector, perhaps, provided government is able to muster a systematic and effective retraining program. My guess is, to the slums of Metro Manila, testing Bayani Fernando’s resolve by refusing to leave the sidewalk to sell their wares or training to join the kidnapping and carnapping industry (that’s part of the service sector, right?).

The message the Ateneans want to send out, however, has to do with the budget deficit. They think current concern over the imminent breach of the self proclaimed limit by government is misplaced. "Breaching the deficit targets by as much as 20 percent will have no adverse impact on inflation and interest rates," they assure. They worry that the government’s growth targets cannot be achieved if they stick to the old threshold.

But before our politicians take that as an academic blessing to a bloating of their pork barrels, the Ateneans want the money spent to promote the welfare of the poor by making sure social services are adequately funded. That sounds like a good description of a good vote-winning pork barrel project. They admit, however, that breaching the self-proclaimed target would adversely affect government’s credibility among investors and the public. In any case, they think the deficit target ceiling would be breached, whether they like it or not.

The problem with Ateneo’s number crunching model is that it is unable to process political factors that always have such a large impact on the economic environment. They are basically using historical numbers in projecting the future. I guess they have yet to work in Behavioral Economics into the model, as if it is possible at all to quantify the way Filipinos behave.

In other words, if Fernando Poe Jr. runs and gets elected President in 2004, their model is kaput… all bets are off. They call that an exogenous event. It will be back to the drawing board, assuming those highly trained economists haven’t gone abroad yet out of fear of what might happen to the real economy.

Pagcor slot machines

Hindi nakalusot! That’s the impression one gets from the failed attempt of Pagcor to introduce slot machines in very public places like LRT stations where the hoi polloi roam. The question is, why did they even try? Didn’t they consult with President Arroyo before they entered into contracts with entities that supplied the slot machines? Who made a lot of money in contracts related to those slot machines in the process? I suppose we still have to pay for all those machines even if they will no longer be used as originally planned.

Something as major as bringing legalized gambling out of the casinos and into more public places, should have been cleared by Malacañang. Or did Malacañang give its blessings only to take it back when the protest mounted from concerned civic and church leaders? Is this the last word on those one-armed bandits or will they sneak in their operations when no one is looking?

I guess the President should make it clear that there will be no more expansion of Pagcor gambling operations beyond what we now have. The initial concept of legalized gambling here is to limit patronage to foreign tourists. We are obviously going beyond that now.

I wonder who earned a windfall in this blotched attempt make gamblers of us all?

It is

I made a mistake in using an expression in my last column. I wrote, if it is too good to be true, it isn’t. I should have written, it is, instead. Oh well, risks of the trade. Thanks to reader Sonny Juico for pointing it out.

Others

I would like to end today’s column with these words of wisdom from Bangko Sentral’s Fe dela Cruz.

If it’s true, as Ateneans say, that we should be men for others, then, what exactly are the others for?

Boo Chanco’s e-mail address is [email protected]/I>