Thursday, 25 June 2009

Slowdown yes but no recession, says UA&P prof

Dennis Estopace
Business Mirror
http://www.businessmirror.com.ph/home/top-news/12205-slowdown-yes-but-no-recession-says-uaap-prof.html

SLOWDOWN, yes. Recession, no. “I disagree with that [World Bank] analysis. How can we be in recession when our employment increased by 1.37 million?”

That was Dr. Victor Abola, economics professor at the University of Asia and the Pacific, adding that the WB may have jumped the gun in seeing “outright recession this year” in the Philippines.

In its report “Global Development Finance 2009: Charting a Global Recovery,” the Washington-based bank said the Philippines is one of five countries in the East Asia and Pacific region that will post negative growth this year, with Malaysia forecast to post the highest contraction of 4.4 percent.

“I don’t know where they’re coming from, but it appears their emphasis is on Q1 figures,” said Abola. He said his university estimates the country’s GDP will grow 4.06 percent this year and 4.92 percent next year.

He surmised the WB, formally known as the International Bank for Reconstruction and Development, used first-quarter GDP figures that the National Statistics Coordination Board placed at 0.4 percent, or teetering on recession.

However, Abola said based on UA&P’s computation, the estimated figure should be revised upwards “or in any case, it will not be that low.”

He said neither the World Bank nor NSCB data considered the impact of other factors like government spending, which he estimates to have been at 21.25 percent of GDP for the quarter.

On the first two months of the year, Abola said they estimate government spending to be about 20 percent, including interest payments. “I believe the fiscal stimulus that the government launched this year has impacted on the economy, thus the higher employment in April.”

Based on the Labor Force Survey, the unemployment rate improved to 7.5 percent in April 2009 from 8 percent in the same period last year. The labor force grew by 3.8 percent, slightly less than the employment growth of 4.3 percent.

Abola said considering that April is the month when new entrants to the labor force come in, the figure is significant “since it tells us a different story on unemployment.”

He suspects the business process outsourcing and health industries may have absorbed the graduates while other new entrants may have gone abroad for work, thereby trimming the unemployment levels.

The April figures show only domestic employment, however, “and with that figure, that means the labor force is growing.”

“We’re in a slowdown but not in a recession or heading towards it. I’m not being optimistic. I’m just saying the numbers don’t lie,” he concluded.

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