Keeping ears close to the ground

The country’s ranking in the 2014 Index of Economic Freedom went up by eight notches. From the previous year’s rank of 97th in the 2013 Index of Economic Freedom, the Philippines now ranked 89th.

This is according to the latest assessment done by the Washington-based Heritage Foundation in partnership with The Wall Street Journal. In joint undertaking, the two prestigious institutions track and gauge countries around the world and rate them in terms of economic freedom. They have been doing this since 1995 and each year, they come up with the so-called Index of Economic Freedom.

The Index of Economic Freedom rates 186 countries in ten categories of economic performance, rule of law, regulatory efficiency, limited government, and open markets. The results are averaged to come up with an overall score.

By doing so, the Index seeks to promote in these countries the individual empowerment of their people, free and open competition, government transparency, and equal opportunity for all.

Based on their scores, the countries are graded and classified by the Index as “free” (those with scores of 80 points or higher); “mostly free” (70-79.9 points); “moderately free” (60-69.9); “mostly unfree” (50-59.9), or “repressed” (under 50). 

Hong Kong and Singapore were the consistent top two ranked countries. Australia, Switzerland, New Zealand and Canada were next ranked in order. The United States was ranked 12th.

For 2014, the Philippines scored 60.1 points compared to the overall world average score of 60.3.  With this score, the Philippines falls under the classification of “moderately free.” Over the 20-year history of the Index, it was noted that the economic freedom score of the Philippines has advanced by 5.1 points. 

In a press statement issued yesterday by the Heritage Foundation, the Philippines is credited for Improvements in seven of the 10 economic freedoms. This includes significant gains in trade freedom and investment freedom.

However, the Index showed that the freedom from corruption has been partially offset by a deterioration in property rights in the Philippines. “Rule of law continues to be a major concern, as ownership structures remain from the time of President Ferdinand Marcos. Philippine leaders must look to strengthen the rule of law and combat corruption if they want to sustain their score improvements,” the Heritage cited.

The Heritage Foundation further mentioned the Philippine economy’s “high degree of resilience,” as it was one of the fastest-growing economies in Asia last year. Also cited were legislative reforms that were undertaken to “enhance the investment environment and incentivize broader-based private-sector job growth.”

We must be doing something right. At least, that’s how we could interpret the piece of good news that the Philippines has done well to keep up with the rest of the world in promoting economic freedom of the people.

That is how international experts from outside looking in perceive how the government and the Filipino people run the Philippine economy. We should know better.

Long before the latest results of the Heritage Index report were released yesterday, we already heard straight from Bangko Sentral ng Pilipinas (BSP) Gov. Amando Tetangco Jr. how the Philippine economy fared as it coped with the challenges and opportunities last year.

As we traditionally do in the Tuesday Club at the start of the year, we invited the BSP governor as our guest speaker at the EDSA Shangri-La in Pasig City. As the Central Bank governor, Tetangco heads the monetary board that serves as the chief monetary policy-making body of the country.

Tetangco also sits as one of the economic advisers of President Benigno “Noy” Aquino lll along with several other executive officials in the economic cluster of the Cabinet. But the BSP is an independent body.

In a review of the previous year’s economic performance, Tetangco admitted the Philippine economy got much boost when it received its first ever investment grade credit rating from Fitch Ratings in March 2013. This was followed by Standard & Poor’s in May, and then by Moody’s in October.

But tail events can happen, he hastily added. And they did happen and nearly stalled the country’s sustained economic growth. Tetangco particularly cited the five consecutive quarters of growth of more than seven percent in the gross domestic product (GDP) while inflation rate ranged at the lower end of the government’s target of three percent.

The Philippines proved resilient though against strong headwinds, the BSP governor said as he drew parallels with the series of natural and man-made disasters that hit the country last year. “We, however, expect the rehabilitation activities would help mitigate these (disasters) supply disruptions,” Tetangco pointed out.

Tetangco was referring to the multibillion-peso rehabilitation and reconstruction projects being lined up by the government this year for Leyte and Samar and other provinces worst hit by super typhoon Yolanda, the destructive earthquake in Bohol and the Zamboanga siege.

As monitored by the BSP, the latest available data on public deficit showed for the first nine months in 2013, it stood 1.2% of GDP. Tetangco noted this is below full year target of 2%.” So the government is in a position to spend more,” he pointed out.

Thus, Tetangco expressed confidence we can expect the strong growth last year to continue in 2014. He conceded though domestic inflation to tick up early this year due to potential increase in food prices caused by the previous year’s calamities and the utility rate hikes.

For 2014, Tetangco gave assurances the BSP would do its best to help keep inflation stable and ensure adequate liquidity to support domestic demand through the use of monetary tools at his command.

Tetangco vowed the BSP would continue to keep its ears close to the ground so that it can effectively help keep the country’s economy on track. But there are certain things beyond control of the BSP and most of them are political in nature. These are the things that are too loud for the ears of the BSP governor.