Technical Note on Philippine GDP Performance under the Administration of President B.S.

Aquino III

Prepared by: Benjamin D. Kritz

This technical note presents the data and calculations used as the basis of the article Why Youre Not Feeling the Countrys Unexpected Economic Growth published 2 June 2012 on the blog Weather on Neptune. The scope of the GDP analysis covers the term of President B.S. Aquino III to date, from the end of the 2nd quarter of 2010 (30 June 2010) through the end of the 1st quarter of 2012 (31 March 2012). Data Sources GDP (current and 2000 constant prices) data: National Statistical Coordination Board (NSCB) Economic Accounts tables available at http://www.nscb.gov.ph/secstat/d_accounts.asp. Inflation rate data: NSCB Prices tables (Consumer Price Index/Headline Inflation Rates, Core Inflation Rates, Retail Price Index in NCR) available at http://www.nscb.gov.ph/secstat/d_price.asp. Population data: NSCB National Accounts of the Philippines (NAP) webpage and included links available at http://www.nscb.gov.ph/sna/default.asp.

Chart 1: Projected Population, Nominal and Real GDP Quarter Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Projected Population (millions of persons) 93.8 94.2 94.7 95.1 95.6 96.0 96.5 96.92 Nominal GDP (millions of pesos) 2,245,797 2,177,534 2,529,605 2,247,052 2,432,571 2,332,641 2,723,257 2,419,980 Real GDP (millions of pesos)1 1,453,390 1,380,231 1,534,877 1,397,933 1,504,993 1,424,905 1,596,579 1,487,311

Notes: 1- In 2000 constant prices. 2- In the press release summarizing the economic data for Q1 2012 (Philippine Economy Posts 6.4 Percent GDP Growth, 31 May 2012), the NSCB states the projected population as 95.2 million; in the absence of any explanation of a revision of population projections, it is assumed that this figure is erroneous, possibly a transposition of the Q1 2011 population projection. The figure provide in Chart 1, 96.9 million, is an extrapolation of the population trend of the preceding seven quarters.

Chart 2: Quarterly and Annualized Change in Nominal and Real GDP Nominal GDP (millions of pesos) 2,245,797 2,177,534 2,529,605 2,247,052 2,432,571 2,332,641 2,723,257 2,419,980 Quarterly Change Annual Change1 Real GDP (millions of pesos)2 Quarterly Change Annual Change

Quarter

Q2 2010 1,453,390 Q3 2010 -3.04% 1,380,231 -5.03% Q4 2010 16.17% 1,534,877 11.20% Q1 2011 -11.17% 1,397,933 -8.92% Q2 2011 8.26% 8.32% 1,504,993 7.66% 3.55% Q3 2011 -4.11% 7.12% 1,424,905 -5.32% 3.24% Q4 2011 16.75% 7.66% 1,596,579 12.05% 4.02% Q1 2012 -11.14% 7.70% 1,487,311 -6.84% 6.39% Notes: 1- Because this analysis is limited to the Aquino term in office, annual changes are only calculated from Q2 2011, representing President Aquinos first full year in office. 2- In 2000 constant prices.

Chart 3: Quarterly and Annualized Change in Nominal and Real GDP Per Capita Projected Population (millions of persons) 93.8 94.2 94.7 95.1 95.6 96.0 96.5 96.93 Nominal GDP per capita (pesos) Real GDP per capita2 (pesos) 15,494.56 14,652.13 16,207.78 14,699.61 15,742.60 14,842.76 16,544.86 15,348.93

Quarter

Quarterly Change

Annual Change1

Quarterly Change

Annual Change

Q2 2010 23,942.40 Q3 2010 23,116.07 Q4 2010 26,711.77 Q1 2011 23,628.31 Q2 2011 25,445.30 Q3 2011 24,298.34 Q4 2011 28,220.28 Q1 2012 24,973.99 Notes: 1- See Note 1, Chart 2. 2- In 2000 constant prices. 3- See Note 2, Chart 1.

-3.45% 15.55% -11.54% 7.69% -4.51% 16.14% -11.50%

6.28% 5.11% 5.65% 5.70%

-5.44% 10.62% -9.31% 7.10% -5.72% 11.47% -7.23%

1.60% 1.30% 2.08% 4.42%

Recalculation of Real GDP According to Q2 2010 Current Prices Rationale Real GDP is calculated by the NSCB according to the expenditure method based on constant year 2000 prices. But because President B.S. Aquino III has made economic growth a key priority of his Administration and linked the results achieved during his term to his program of corruption 2

reduction and good governance (Philippines optimistic to sustain economic growth SunStar Manila, 31 May 2012), a logical baseline from which to calculate constant prices and real GDP would be from the point at which the Philippine economy became Aquinos responsibility, i.e., the end of Q2 2010. There are also significant differences in basic economic indicators between the current 2000 baseline and Q2 2010, and the latter figures may arguably better represent the present economic reality of the country: Indicator Nominal GDP (millions of pesos) Population (Est.) Currency Exchange Rate (US$ Equivalent) Headline Inflation Rate End of 2000 949,516 76,500,000 Php 49.9000 6.6% End of Q2 2010 2,245,797 93,800,000 Php 46.2464 3.7%

Deflator: In order to compensate for price inflation and calculate real GDP, the nominal GDP in each quarter must be deflated. In this analysis, this is done according to the formula

where is the real GDP, is the nominal GDP, and is the headline inflation rate. NSCB calculates inflation with two constants, 2000 = 100 and 2006 = 100; the latter, being more recent, is the baseline used in this analysis.

Chart 4: Recalculated Real GDP

Quarter Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 GDPN 2,245,797 2,177,534 2,529,605 2,247,052 2,432,571 2,332,641 2,723,257 2,419,980 HL Inflation 3.7% 3.9% 3.6% 4.8% 5.2% 4.8% 4.2% 2.6% Deflator 1.000 1.039 1.076 1.128 1.187 1.244 1.296 1.330 GDPR 2,245,797 2,095,798 2,350,934 1,992,067 2,049,344 1,875,113 2,101,279 1,819,534 Quarterly Change -6.68% 12.17% -15.26% 2.88% -8.50% 12.06% -13.41% Annual Change1

-8.75% -10.53% -10.62% -8.66%

Notes: 1- See Note 1, Chart 2. 3

Chart 3: Quarterly and Annualized Change in Real GDP Per Capita, Q2 2010 Constant Prices Projected Population (millions of persons) 93.8 94.2 94.7 95.1 95.6 96.0 96.5 96.92 GDPR per capita (pesos) Quarterly Change Annual Change1

Quarter

GDPR

Q2 2010 2,245,797 15,494.56 Q3 2010 2,095,798 22,248.39 43.59%3 Q4 2010 2,350,934 24,825.07 11.58% Q1 2011 1,992,067 20,947.08 -15.62% Q2 2011 2,049,344 21,436.65 2.34% 38.35%3 Q3 2011 1,875,113 19,532.43 -8.88% -12.21% Q4 2011 2,101,279 21,774.91 11.48% -12.29% Q1 2012 1,819,534 18,777.44 -13.77% -10.36% Notes: 1- See Note 1, Chart 2. 2- See Note 2, Chart 1. 3- The large gain is due to the recalculation of the constant prices, and is not a reflection of actual economic performance.