MANILA — The Department of Finance (DOF) on Tuesday said that the country’s nine-notch drop in competitiveness ranking could serve as a “wake-up call”, but the assessment done by Swiss business school IMD was not backed up by actual data.
The IMD World Competitiveness Report showed that the Philippines ranked 50th this year, down from the 41st spot in the 2017 survey, suggesting it had the “most significant decline” in Asia.
“The reasons for such drop include a decline in tourism and employment, the worsening of public finances and a surge in concerns about the education system,” the IMD report stated.
Finance Undersecretary and chief economist Gil Beltran said the ratings methodology employed by IMD “mechanically ranks cold numbers without understanding the dynamics of the economy”, noting that benchmarks were not even used to gauge relative performance.
“The result is that rankings tend to be volatile… Nevertheless, the dip in ranking is still a wakeup call, notwithstanding its being a false alarm in some respects,” Beltran said in a statement.
Beltran argued that the country’s employed persons rose 6.1 percent in January 2018 and unemployment rate dropped to 5.3 percent.
He added that the Philippines welcomed 1.4 million international visitors for the period of January-February 2018, which represents a 16.1 percent increase compared to the same period last year. It reached an all-time high in 2017 with 6.6 million tourists visiting the country.
The chief economist also described the IMD’s claim that the state of public finance is worsening as “simply laughable” and a reflection of “gross research incompetence” on its part. “We won’t go to lengths to dispute such statement regarding our fiscal affairs but would like to refer to other third party assessments–credit rating agencies and the IMF,” Beltran said.
“If the state of our public finance was really deteriorating, credit rating agencies would have taken notice and have downgraded us accordingly. But no, we’re still investment grade!” he added. Beltran pointed that the IMD has failed to distinguish between short-term adjustments and long-term prospects, and thus mistook the former for loss in competitiveness.
He cited as an example that the 2017 current account surplus earned the country a rank of 31st in the current account measure but the deficit the following year resulted in a demerit in competitiveness so that the country now ranks 41st.
Beltran added that using the current account as a measure of competitiveness is like the “misguided mercantilist thinking” that the greater the surplus, the better it is for the economy. “In the first place, it really makes no sense to rank economies based on the size of their current account balances relative to GDP if the objective is to assess competitiveness,” he said.
“The depreciation in the currency was also noted and was associated with more instability. But textbook economics teaches that a country’s competitiveness improves as its currency depreciates!” he added.
The competitiveness report is based on 258 indicators, which involve hard data such as employment and trade statistics as well as soft data from Executive Opinion Survey measuring business perception on various issues — corruption, environmental concerns, and quality of life. (PNA)
