In the world of finance, data plays a crucial role in supporting economic theories and guiding people to make financial decisions. Interestingly, even when the numbers are entirely accurate, data can be presented in a way that aligns with a particular narrative.

Today, we will provide you with an example of how various fundamental measurements can convey contrasting narratives.

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Even when the data remains unaltered, without tampering or manipulation of the figures, numbers can easily be molded to construct or bolster a specific “narrative.”

A compelling example of this phenomenon becomes evident when we contrast two essential growth metrics within a specific economic sector. To illustrate this, let’s delve into the performance of the digital economy.

The digital economy is composed of sub-industries: e-commerce, digital media/content, and digital-enabling infrastructure with its own categories. The key drivers are telecommunication services (30.7%), professional business services (27.0%), and e-commerce (20.0%). Two of these major contributors fall under digital enabling infrastructure which makes up 77.2% of the entire digital economy.

The chart below shows an interesting trend: the digital economy’s contribution to GDP has been decreasing over the past four years, dropping from 10.1% in 2018 to 9.4% in 2022. This data raises questions, especially when technology is becoming more integrated into our daily lives and the digital economy is expected to grow.

Given how the pandemic further prompted the growth of technology integration in our lives, some people might be wondering about the declining digital economy contributions to GDP, raising important questions about its accuracy in our evolving tech landscape.

However, if we look at the actual yearly transactional value of the Philippine digital economy, we could see it tells us a different story…

Before the COVID-19 pandemic, the digital economy had been steadily growing in terms of transactional value, reaching PHP 1.8 trillion in 2018 and PHP 1.9 trillion in 2019. It dipped momentarily in 2020 to PHP 1.7 trillion, as the whole economy came to a near halt.

Subsequently, the digital economy not only recovered but also accelerated its growth rate, surpassing PHP 2.0 trillion in transactional value in 2022. This can be attributed to the 26.5% year-over-year growth in e-commerce, driven by the increasing popularity of convenient online shopping. Moreover, other growth drivers included the repair of computers and communication equipment (19.6%) and digital media/content (11.8%).

So why does this second chart tell us a different story?

The first chart primarily illustrates the contribution of the digital economy to GDP, but this metric does not provide an accurate representation of the industry’s growth. This limitation arises because GDP encompasses various economic factors such as price deflation, import and export dynamics, and shifting industry composition, resulting in potential distortions.

Conversely, the second chart, which depicts raw transactional value, offers a more precise picture of the industry’s performance. This metric directly captures the monetary value generated within the industry, providing a clearer and more detailed view of its economic activity.

While both charts present unaltered and raw data, they reveal distinct narratives. This underscores the critical importance of maintaining a healthy skepticism when interpreting statistics.

This reminds us that even seemingly objective figures can be influenced by the metrics chosen, the context in which they are presented, and the broader economic complexity landscape. So, it’s vital to analyze data carefully to fully grasp the true economic situation.

About the Philippine Markets Newsletter
“The Monday Macro Report”

When just about anyone can post just about anything online, it gets increasingly difficult for an individual investor to sift through the plethora of information available.

Investors need a tool that will help them cut through any biased or misleading information and dive straight into reliable and useful data.

Every Monday, we publish an interesting chart on the Philippine economy and stock market. We highlight data that investors would normally look at, but through the lens of Uniform Accounting, a powerful tool that gets investors closer to understanding the economic reality of firms.

Understanding what kind of market we are in, what leading indicators we should be looking at, and what market expectations are, will make investing a less monumental task than finding a needle in a haystack.

Hope you’ve found this week’s macro chart interesting and insightful.

Stay tuned for next week’s Monday Macro report!

Regards,

Angelica Lim
Research Director
Philippine Markets Newsletter
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