Barring propaganda, the economy is not really in good shape.

Despite, the inflation rate cut to 4.7%, still 10 million Filipinos go hungry everyday and 35 million live below the poverty line. Despite new employment figures, the new hirees fall short of the 1.5 million annual target.

The 5.5% GDP growth rate, already mediocre by Asian standards, is spurred mainly by consumption (75%) and lamely by investments (15%) and government spending of (10%).

But, it is investments that raise productivity and create jobs and new wealth. And yet as of 2005, RP only attracted a miniscule US$1.5 billion in Foreign Direct Investments, compared to Vietnam (US$2.0 billion), and Malaysia and Thailand (US$4.0 billion). This is largely due to the country's political instability caused by the twin issues of legitimacy and corruption.

Until we address the root rather than the symptoms of political instability, RP will scare investors off. Let we be warned that any government effort to win the 2007 elections by fraud, gold and guns - in order to protect the status quo - will backfire into a larger conflagration it may no longer be able to contain, thereafter.

The other issue of corruption - being the second most dirty in Asia - despite 100 years of Evangelical conversion and 400 years of Catholic domination - increases the cost of investment and therefore the ROI (return on investment) hurdle of investors. Who would dare come here before other countries?

Yet, instead of addressing political reforms, we are faced with 700 deaths of militants and 49 journalists while opportunists perform idiotic routes to amend the constitution - which has further damaged the people's faith in the administration.

Investors are also turned off by the fact that the country has very poor infrastructure compared to the Asean neighbors. As a result of trying to narrow the budget deficit, less and less of services are accorded to the people.

For instance, in 2001 infrastructure constituted 1.8% of GDP compared to only 0.73% in 2006; education from 3.0% in 2001 to 24% in 2006 and health from a 0.4% to a woeful 0.19% in 2006. These social costs have largely been hidden from the loud cacophony of drumbeaters of the government regarding a balanced budget. But, no less than Finance Secretary Margarito Teves has stated that to just keep in even keel with our neighbors, our investment profile should be 5% of GDP - a long shot from where we are today.

Agriculture performed relatively well in 2006 until the four devastating typhoons that cut the country's gut in the last months of the year. The El Niño phenomenon expected till September 2007 will also dampen agri growth.

In the "Future State of the Nation" address, GMA spoke of mega infra projects costing perhaps P3 trillion over her remaining term and her pupils have said this will be financed by the new VAT tax of 12% and the sin taxes. This is not entirely true, because these taxes are really meant to bridge the budget deficit for normal government operations on a year-to-year basis.

With a public external debt of US$35 billion, how much more can government afford to finance its infrastructure targets without new pressures on the foreign exchange and interest rates? That is a serious question government must answer as candidly as possible.

There have been one-page ads and headline grabbers of so-called good economic performance of the country while Juan de la Cruz survives on Lucky Me noodles and rice - after the holidays. They are all illusions of growth.

The Philippine stock market hit the 2,900 level, a 10-year high, but only the rich and the corporations can trade at the stock market. Unless there are new issues called IPOs, the velocity in the trading only creates gainers and losers within the same income class and do not create new jobs and investments.

Then, government crows about the Philippine peso: dollar exchange rate at P49: US 1 at year end - and yet refused to include the fact that the OFWs will receive US$1 billion less from the US$10 billion remittance because of the peso appreciation.

Likewise the US$16 billion exports of the Philippines in 2006 will now be seriously threatened by the weakening of the dollar and would make Philippine exports less competitive in 2007. Besides, the over-all export growth figure should be tempered by the net export figure since the country is still facing a trade deficit - meaning, we import more than we export every year.

Finally, the main drivers of the local autonomy, like the telecoms - really benefits the capitalists largely (Globe, Smart, Sun, PLDT) and call centers - the middle class who alone can speak English that is English - so that the bottom ranked Filipinos do not feel this growth, at all.

We hate to be a wet blanket but we don't see any good in 2007.

The political confrontation and bloody elections and possibly, questionable election results - will add fuel to the furnace and create new instabilities. Any attempt to create artificial windfalls like farmer loans and feeding programs - to buy votes - is many times inflationary and counter-productive. Aside from these being acts of pure electioneering.

We don't know about you. But time and again, we have often heard of government announcing the country is on the verge of economic take-offs. So far, we have not taken off. All we see are the airplanes at the runway and people angry and hungry waiting at the pre-departure terminals. Woe to us.