In presenting the positive results of the government’s economic programs, the secretary of the Department of Budget and Management (DBM), along with former economic development secretaries, points to our massive expenditure programs and their impact on gross domestic productivity (GDP). From an economist’s perspective, that makes sense. GDP is the default performance metric. And, indeed, the data show a growing economy.

In the face of critics who point to the inflation rate and the weakness of the peso as proofs of the failure of the administration’s economic program, the numbers behind GDP and the prospective growth from government’s aggressive spending and infrastructure programs show otherwise.

As it is impossible to deny the debilitating effects of high prices, it is also impossible to deny the GDP data. Note the following. Our growth targets are holding, albeit tempered by adjustments in inflation rates. Both GDP and gross regional domestic productivity (GRDP) remain high. Highest GRDP growth exceeds 12.5 percent or twice the national GDP. No region registered negative growth.

So why is there an apparent disconnect that allows critics to clamber up podiums in attacking government’s economic programs to the point of either demanding that the tax reform measures be repealed or that government allows raising wages to such astounding levels that are certain to aggravate already astronomic aggregate prices and possibly lead to even higher unemployment as companies cut manpower costs?

The contradictions lie in long-held misconceptions on economic output and public welfare.

In the fifth grade we were taught our country was rich in mineral resources, our land, incredibly fertile and our waters, teeming with fish and other aquatic wealth. And yet in our boondocks we find our poorest. And, compared with other sectors, our farmers and fisherfolk have the lowest incomes.

Worsening these contradictions, economists maintain that our GDP growth is among the region’s highest, next only to China’s.

But consider this. Angola’s GDP growth rate averaged 8.68 percent from 2000 to 2017 with its highest at 23.2 percent or about eight times the US, yet 36 percent to 40 percent of Angolans live below the poverty line.

When measuring an economy, economists–especially the DBM secretary who is focused on budgets, benchmark using the national output or GDP where the total amount of output in goods and services effectively constitutes the ultimate budget constraint.

Expenditures cannot exceed the total out lest fiscal deficits occur. Where expenditures are necessary and a fiscal deficit looms, tax collections must accelerate to balance the budget. This explains why the DBM secretary uses GDP to justify government’s Tax Reform for Acceleration and Inclusion or TRAIN. This also explains why the secretary of Finance advocates reforming tax structures where output increases through infrastructure upgrades on one end, lower corporate taxes from TRAIN2 on another and more employed in between.

But what about the rising costs of living? Here lie the limitations of GDP. Here also lies bias where critics prematurely declare Duterte’s economic programs, particularly TRAIN, as a failure.

GDP measures output and per capita GDP measures output spread across a population. There are three mathematical formulae to compute for GDP, all producing the same answer. The simplest is the expenditure approach where two integral addenda that increase GDP are government and household consumer spending. This explains the “Build, Build, Build” initiative, the leeway granted to minimum wage earners and why the DBM uses GDP to justify TRAIN.

As a measure of performance, GDP does not measure welfare or well-being. It was not designed for those. It’s all about output. Analyze its variables. It neither measures costs of living nor inflation which government’s critics now disingenuously declare as clear indications of economic failure. They’re not viewing the economy holistically. To get a more definitive measure of well-being other indices are better suited.

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