THE DEPARTMENT of Finance (DoF) on Tuesday disputed the International Institute of Management Development’s (IMD) latest World Competitiveness Rankings report that saw the Philippines’ dropping nine rungs, arguing that this was not consistent with data.
In a statement, Finance Undersecretary Gil S. Beltran said the annual report’s latest findings “are not backed up by actual data.”
The research group of Switzerland-based business school IMD in its report last week ranked the Philippines 50th out of 63 economies in terms of overall competitiveness, citing weakening in tourism and employment, worsening public finances and concerns about the education system.
IMD had yet to reply as of early Tuesday evening when asked for a response to the DoF’s statement.
“First, while IMD says tourism and employment has declined, the country’s employed persons rose 6.1% in January 2018 and unemployment rate dropped to 5.3%, the lowest since the country started compiling unemployment statistics,” Mr. Beltran said.
“Also, international tourist arrivals to the Philippines rose by 16.1% to 1.4 million visitors for the period January-February 2018 compared to its level in the same period last year,” he added, noting that “[i]n 2017, Philippine tourists reached an all-time high of 6.6 million.”
Mr. Beltran added that the claim of worsening public finance was “simply laughable.”
“The statement by the IMD reflects gross research incompetence. 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 (International Monetary Fund),” the DoF official 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.”
The Philippines’ has credit ratings that are a notch above minimum investment grade from three of the major international debt watchers, S&P Global Ratings, Fitch Ratings and Moody’s Investors Service.
Mr. Beltran also disputed IMD’s concerns about the widening current account deficit and the weak local currency.
He noted IMD’s “failure to distinguish between short-term adjustments and long-term prospects and has mistaken the former for loss in competitiveness.”
“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…,” Mr. Beltran explained.
“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.”
Economists and state officials have said that the current account deficit has been fueled by importation of raw materials and capital equipment needed by businesses to expand.
“In short, the ratings methodology employed by IMD mechanically ranks cold numbers without understanding the dynamics of the economy. The result is that rankings tend to be volatile. Neither does it use benchmarks with which to gauge relative performance,” said Mr. Beltran.
“Nevertheless, the dip in ranking is still a wake-up call… We do recognize the real issues such as red tape and insufficiency in infrastructure and we are working hard to address those.” — Elijah Joseph C. Tubayan