MANILA, Philippines?The European Union commended the Philippines last week in less than ecstatic terms for the "substantial" gross domestic product (GDP) growth it achieved in 2007.

Speaking at a public forum, EU Ambassador Alistair MacDonald acknowledged the 7.3-percent growth in 2007, saying, "We recognize that this is the best macroeconomic performance in some 50 years."

However, MacDonald immediately discounted the acknowledgment by promptly pointing to the more glaring downsides of the growth. He said: "You have seen the recent data that came from the National Statistical Coordinating Board (NSCB) that the rate of poverty in the Philippines as a proportion of the population living on less than a dollar a day has in fact increased from 30 percent to 33 percent notwithstanding the improved economic performance overall."

MacDonald added: "Now, the government is certainly going to have its work cut out to achieve the Millennium Development Goals (adopted by the United Nations, to which the Philippines has committed itself) ... to ensure that the poorest communities have access to proper health and education services and can share in the benefits of this improved economic climate."

Not enough

Stripped of polite diplomatic language, the European Union is asking the government about the beneficiaries of this economic growth and seems to be reproaching it that it is not doing enough to spread the benefits to reduce the disparity between the rich and the poor.

At the same time, the European Union highlighted "the need to improve the revenue efforts in order to permit effective measures to be taken to reduce social inequality."

This echoed the spate of recent criticisms by international financial institutions, investment banks and independent economists, which have hammered the theme of the poor revenue-generation capacity of the Philippine government.

HK investment forum

In the wake of the European Union's qualified recognition of the 2007 growth, President Gloria Macapagal-Arroyo embarked on a campaign to drum up foreign investment with a weekend trip to Hong Kong, where she spoke at the 11th Credit Suisse Asian Investment Conference, to make the pitch for the Philippines as a "valued investors' destination."

In this campaign, the EU commendation is of little help. Ms Arroyo will be presenting a weak case for the Philippines as an investment Mecca because corruption scandals have marred her administration's transactions with foreign and government-backed corporations, notably the contract (now abrogated) on the National Broadband Network (NBN) with China's ZTE Corp.

Fantasy

In her campaign, based on the 7.3-percent star performance in 2007, Ms Arroyo is trying to project an image of sustained high growth that is beginning to appear as a short-lived bubble and economic fantasy.

The image is colliding with the economic reality that is painted by a barrage of criticisms from a number of independent and reputable economists and international financial and investment institutions.

The critics center their attacks on the statistical methodology used by the government in its projection and on issues such as the incompatibility of the high growth with its record of generating jobs.

Some also find the forecasts of sustaining the high-growth pattern unrealistic and contradicted by the prospects of slowing global growth in 2008 and the coming years.

Ms Arroyo is certain to find herself facing in the Hong Kong conference a highly skeptical and hard-nosed audience of investors, who are not unaware of the well-reasoned critiques that have intensified in Manila over the past few weeks.

Thus, the critics have ample ammunition to question her claim that her administration has created a million jobs and attracted big foreign investments.

The audience can just refer to the data presented by these critics that the President is creating a fantasy world in which the Philippines is an investors' paradise.

Growth rate overstated

The deflation of the 7.3-percent-growth claim is fully under way in Manila. The charge is led by a group of independent economists, including former socioeconomic planning secretaries, which emphasizes that the growth rate is overstated.

Felipe Medalla, a director general of the National Economic and Development Authority (Neda) during the Estrada administration, told a briefing of the 2008 Economic and Social Survey of Asia and the Pacific on Friday that the 7.3-percent growth "is, in all likelihood, a statistical fiction." He placed the actual growth rate at about 5.5 percent.

Medalla, a professor at the University of the Philippines? School of Economics, said the 2007 GDP growth reported by the NSCB was inconsistent with other economic indicators.

He said the national income accounts were not reliable because the NSCB lacked the resources to conduct accurate surveys of the performance of all economic sectors.

Few jobs despite growth

In an earlier column in the Philippine Daily Inquirer, Cielito Habito, a NEDA director general during the Ramos administration, doubted the reliability of the 7.3-percent growth. He cited Medalla's continuing study on GDP growth, and said there appeared to be "compelling reasons to question the figures we have been getting lately."

Habito also pointed out that official jobs data raised more questions on the veracity of the 2007 growth. He noted the inconsistency between the low job generation and high growth.

Habito said the economy yielded only 150,000 new jobs in 2007. He found that this was the lowest annual rate in recent years, and yet it occurred when the economy reportedly grew the fastest in 31 years.

A New York-based think tank, Global Source, found that the 7.3-percent growth defied historical trends, asking whether it reflected the real economic picture. It pointed out the need for the government to enhance the gathering and processing of national income data and "make it more reflective of what goes on in the real economy."

This reinforced the "overstated growth" critique. Credit Suisse has forecast a 5.6-percent GDP growth in 2008 in light of the signs of global economic slowdown, from which the Philippines cannot be immune.

Although it considered a 5.6-percent growth "decent," the government appears to be building a house of cards on the image based on unreliable, or worse, falsified statistics.

This is a foundation for a big bust of disenchantment.