Friday, 29 January 2010

Stimulus, remittances help win GDP target

Cai U. Ordinario
Business Mirror

DESPITE typhoons Ondoy and Pepeng and the global economic crisis, the Philippine economy seemed to have beaten the odds by posting a 0.9-percent growth for the full year and a better-than-expected 1.8 percent in the fourth quarter of 2009.

The National Statistical Coordination Board (NSCB) reported on Thursday that the economic growth in 2009 was supported by its perennial savior, the services sector, which contributed about 1.6 percent to full-year gross domestic product (GDP) and 2 percent to fourth-quarter GDP.

Government spending, in one of those rare instances, also contributed significantly to growth, thanks to the Economic Resiliency Plan (ERP), which forced the government to cough up 60 percent to 80 percent of its budget early on in the year.

The GDP numbers not only met the government’s target for 2009, which is within the range 0.8 percent to 1.8 percent, but also was within the forecast of the National Economic and Development Authority (Neda).

The Neda earlier projected that full-year growth would be within the range of 0.7 percent to 1 percent, and fourth-quarter growth would be between 0.6 percent and 1.6 percent.

“I am pleased with the NSCB’s report that the country’s GDP grew by 1.8 percent in the fourth quarter of 2009. This continued the trend of positive performance amid the global economic crisis and recent natural calamities,” Neda Acting Director General Augusto Santos said at the press conference on the National Income Accounts (NIA) on Thursday.

“More important, the Philippine economy has never entered into a recession despite the odds,” Santos added.

However, while hitting the target is good news, some economists doubted whether the numbers reflect the actual performance of the economy in the last quarter of the year and the whole of 2009.

Economists like former budget secretary Benjamin Diokno believe that large revisions, similar to the revisions made for the first quarter of 2009, are likely.

With agriculture posting a negative 2.8-percent growth in the fourth quarter, there may be little room for the economy to still post a growth of 1.8 percent in the last quarter of the year, he said.

“Since these numbers are only preliminary, I suspect there would be significant revisions. It is likely that the revisions will be downward [and will result in a figure] that would not meet even the 0.8 percent of the government’s target,” Diokno said in a phone interview.

He noted that the government has been revising its growth figures. One of the major revisions that it made was in the first quarter of 2009.

The NSCB announced that first-quarter GDP was revised upward to 0.6 percent from 0.4 percent; while GNP was revised downward to 3.1 percent from 4.4 percent.

The NSCB explained that the revision in GNP was caused mainly by the downward revision of NFIA to 25.8 percent from 40.8 percent.

Given that the agriculture sector was among the main drags in the fourth quarter, University of the Philippines economist Prof. Ernesto Pernia said it would only be reasonable to expect that the GDP growth of 1.8 percent was not achieved.

“[Given that] agriculture was one of the factors that affected fourth-quarter growth, the fourth quarter [GDP] shouldn’t have reached 1.8 percent,” Pernia said in a phone interview.

Nonetheless, NSCB secretary-general Romulo Virola said that even if the estimates made in the fourth quarter were weaker than other quarters, since the data is still incomplete, revising, if at all, would like be upward.

This, Virola said, would especially be true if the manufacturing numbers in December 2009, which were set to be released in a few weeks, would be positive. Then it is likely that the GDP numbers will be revised upward.

Director Dennis Arroyo of the Neda National Planning and Policy Staff (NPPS) added that many indicators are pointing to increasing trends, such as manufacturing,which has been steadily increasing from negative 7.6 percent in the first quarter to 1.3-percent growth in the fourth quarter.

Arroyo added that export growth is also increasing. It started with a negative 24.6-percent growth in the first quarter to negative 9.1 percent in the fourth quarter.

“The numbers are fast becoming positive in the fourth quarter,” Arroyo said.

Looking forward to 2010

For this year, Santos said the government is maintaining its 2.6 percent to 3.6-percent growth target. He said there are many reasons the government is confident about this, among them, the election spending that is seen to boost consumption spending.

“We are, thus, optimistic. Our optimism will be matched by measures to address our fiscal challenges, and we trust that our colleagues at the Bangko Sentral will continue with their appropriate monetary policies. We will continue safeguarding the welfare of our overseas workers who faithfully play a very important role in our development. At the same time, we will be developing industries that will create hordes of jobs at home,” Santos said.

Arroyo said the projection already factors in the possible dampening effect of a looming El Niño phenomenon. He said that if the country experienced a severe El Niño, full-year growth for 2010 would be around 2.6 percent.

He added that the forecast already considered the expectations that Dubai crude would be between $70 per barrel and $90 per barrel. Currently, Arroyo said, Dubai crude is at $79 per barrel, deeming the growth target “safe” from possible changes.

For his part, Pernia said that looking forward, in 2010, it would be likely at the low-end of the 2.6-percent to 3.6-percent growth forecast of the government.

He said this would most likely be due to election spending and the improvement in the global economy, which will augur well for the state of Philippine exports.

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