Saturday, 30 May 2009

Philippine economy unlikely to fall to a recession, NEDA says

MANILA (PNA) -- The National Economic and Development Authority said the economy is unlikely to fall into recession, thanks to the expected improvement in government and consumer spending this year.

"I don't expect a recession," Socio-economic Planning Secretary Ralph Recto said, adding that the second quarter would be "better" due to improved government spending as most of the budget of the agencies have already been released.

"You will see the effect of the full spending by the second quarter. Especially when payment[s] are already made to the contractors so that these money turns around the economy," Recto said.

Romulo Virola, secretary general of NSCB, said a big challenge to the economic managers during the remaining month of the second quarter is the fact that the economy is now "teetering into recession."

Virola said the leading economic indicators from April to June breached the negative territory confirming the "all too real threat to a recession."

He said the LEI posted a negative 0.195 in the second quarter from a revised positive 0.045 in the first quarter.

The LEI serves as a basis for short-term forecasting of macroeconomic activity, as it incorporates the behavior of indicators that consistently move upward or downward before the actual expansion or contraction of the economy.

Given the first-quarter results, Recto is less confident to hit the 3.1 percent to 4.1 percent GDP growth target for the year.

In the first quarter of the year, the economy grew by only 0.4 percent from 3.9 percent in the same period last year.

"There might be a need to readjust our growth projections for the year," Recto said.

"To attain this growth, succeeding quarters should post GDP growth of 4.1 percent to 5.4 percent," he said.

"We need to reinforce the socio-economic defense shield. Considering that the appetite of the private sector to spend remains weak and given the below-expected performance of public construction in the first quarter, there is a need for the government to further press on with the implementation of its fiscal stimulus program," Recto added.

He said the government needs to ensure that its frontloading strategy and budget program for the rest of the year would indeed produce real and tangible outputs that would help mitigate the impact of the global economic crisis and ensure that the country will join other economies when the global economy rebounds.

It is also crucial to maintain the improving level of consumer and business confidence by intensifying the implementation of measures to meet the revenue target, ensuring a sound expenditure and debt management, and showing that actions speak louder than words.

"Stronger government commitment in implementing the Economic Resiliency Plan will help defend the economy from more damaging effects of the global economic crisis and help realize the growth target," the NEDA chief said.

Speedy and quality actions are important, Recto said, adding that the "positive prospects from some industries that remain resilient amid the crisis should encourage us to keep our guards up.

"More importantly, hard work and cooperation among all sectors of the society will help the economy perform better in the coming quarters."

"As the government fine-tunes fiscal and monetary policies and provide the necessary support to all sectors in order to mitigate the lingering impact of the crisis, our economy is expected to remain afloat in 2009," Recto said.

While some economic analysts remain conservative on the outlook on the global economy, there are increasing reports that hint to the bottoming out of the global crisis earlier that expected.

He adds, "This may spur a race to recovery, hence, a business-as usual mode for the Philippines would not be acceptable - we must strive to be a step ahead if not at the head of the recovery." (PNA)

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