How reliable is GDP as a measure of economic performance?

Upholding truth in numbers

MANILA, Philippines — Every quarter, the Philippine Statistics Authority (PSA) provides a report on the country’s economic performance by presenting the National Accounts, which includes the gross domestic product (GDP).

Widely used by countries to gauge economic performance, the GDP represents the total value of final goods and services produced within an economy in a given period.

But how can one be assured that the GDP figure being reported is reliable? 

To this question, National Economic and Development Authority  (NEDA) Secretary Arsenio Balisacan said in an interview that the GDP figure is being produced by the PSA, the country’s statistics agency.

Last May, the PSA reported that the Philippine economy grew by 5.7 percent in the first quarter. This is slower than the 6.4 percent expansion posted in the same period last year, but faster than the 5.5 percent growth in the fourth quarter of 2023.

“Our PSA is one of the most respected statistical systems in Southeast Asia,” Balisacan said.

Based on the World Bank’s Statistical Performance Indicators (SPI), which assesses the performance of statistical systems and efforts to improve them, he said the PSA is a reliable source of statistical data.

Results of the 2022 edition of the World Bank’s SPI showed the Philippines ranked second among countries in Southeast Asia as it got an overall score of 83.4 out of 100, bested only by Singapore with an overall score of 86.6.

Compared to its income group, the Philippines’ overall score is higher than the 62.6 average score of lower middle-income countries.

Data pillars

The World Bank measures the maturity and performance of national statistical systems through five pillars: data use, data services, data products, data sources and data infrastructure.

In terms of data use, the Philippines got a perfect score of 100 with data produced being used across various sectors.

When it comes to data services, the Philippines got a score of 91, while its score was at 89.81 in data products and 81.45 in data sources.

An area where the country needs further development is in data infrastructure as it got a score of 55.

By tracking the capacity and maturity of national statistical systems, the World Bank wants to help build better statistical systems that can develop and meet the needs of governments and citizens so better decisions can be made through improved data.

The World Bank’s goal through the SPI is to improve development outcomes and track progress toward the Sustainable Development Goals, which aim to address global challenges like poverty, inequality and climate change and to achieve a better future for all. 

“These are indicators showing there are external parties like the World Bank, the UN (United Nations) that are checking our data,” National Statistician Dennis Mapa said in an interview.

As a member of the international community of national statistical offices, he said the PSA adheres to the UN fundamental principles on official statistics. 

He said such provides a basis for how the statistics agency reports data.

“So the accuracy of the data, confidentiality, it’s really there. That is how official statisticians work,” he said.

He also said there is transparency in how data is being produced with the PSA publishing the sampling design and protocol under the technical notes on its website.

“If you mimic it, if you replicate it, you will end up with the same result that we reported. So, you know that guarantee is there, the reliability, accuracy of our report,” he said.

As producing the GDP figure involves gathering data from various sources like the government and business establishments, he said there are times when there are delays in receiving the reports, leading to revisions being made to the number.

Changes made to the GDP estimate follow a policy consistent with international standard practices on national accounts revisions.

“Having a revision is not unique to the Philippines. All other countries do their revision [of the GDP],” Mapa said. 

He also said revisions made by the PSA to the GDP estimate, particularly the growth rate are typically minor.

For the government, which has set development goals, Balisacan said having reliable data is important.

AmBisyon Natin 2040

In 2015, the NEDA spearheaded the formulation of the Philippines’ collective long-term vision — AmBisyon Natin 2040 — aiming for a strongly rooted, comfortable and secure life for Filipinos.

The country’s overall development blueprint or the Philippine Development Plan (PDP) 2023 to 2028 formulated under the current administration is geared toward the attainment of AmBisyon Natin 2040.

Under the PDP, the goal is to create jobs and accelerate poverty reduction by bringing the economy to a high growth path.

“As we continue to track our country’s progress toward achieving our development goals, we count on the PSA’s commitment and dedication to delivering an expanded or providing accurate and reliable data from censuses, surveys and other data systems,” Balisacan said.

Having relied on consumption to drive economic growth, he said the government is encouraging more investments to be made, particularly in critical infrastructure to sustain the country’s growth in the future.

Makati Business Club executive director Roberto Batungbacal said in an interview that having reliable data issued by the government like the GDP figure is also important for the private sector as such is used in planning their business operations. 

Having been involved in the chemical industry as former country manager of Dow Chemicals Phils. Inc., Batungbacal said he was closely watching the GDP figure, particularly data on manufacturing to be able to see the sector’s performance.

“So, I’m able to monitor or see which one is growing, which one is not going to grow. And that’s how we can decide how to allocate our resources,” he said.

He said the GDP is a good economic indicator to track industry performance over the years as it allows one to look back at figures in the past decades.

Recognizing the complex process involved in producing the GDP figure, he said the private sector has a role to play to make sure there is reliable data to be used.

He said major firms are being asked to answer survey forms used in coming up with the GDP estimate.

“That’s an important contribution of the private sector, to answer the survey forms in a timely manner, religious manner. Otherwise, if we don’t do a good job, nobody has good data,” he said.