Friday, 5 February 2010

‘GDP growth could be higher’

Cai U. Ordinario
Business Mirror

WITH a presidential election under way and the expected recovery in exports, the National Economic and Development Authority (Neda) held out the possibility on Thursday that the interagency Development Budget Coordination Committee (DBCC) may have underestimated the growth projection this year.

Neda Acting Director General Augusto Santos said growth in 2010 could be higher than the 2.6-percent to 3.6- percent gross domestic product (GDP) growth range estimated by the DBCC last year.

Santos said that with this, there may be a possibility the DBCC will revise its 2010 growth estimates upward. However, the Neda chief said the DBCC had not, to date, set a date for discussing this.

“My gut feel is that we may have to review the macroeconomic figures. We feel that we may have underestimated the growth potential of the Philippine economy this year, 2010. It [growth] can be bigger than the 2.6-percent to 3.6-percent [estimate],” Santos told reporters on Thursday.

Santos explained that the elections alone could easily account for around 5 percent of whatever the GDP growth rate would be in 2010. In 2007 Santos said elections accounted for a little over 4 percent of the 7.2-percent growth.

He noted that 2007 was also an election year. The only difference of 2007 with 2010 is that the 2010 elections will be a presidential election and would therefore mean higher election spending.

“In 2007 our GDP growth was [around] 7 percent. Out of that 7 percent, [less than 5 percent] of the 7 percent was due to election spending and it was not even a presidential- election. So i can say roughly, election- spending contribution to GDP growth this year will more or less be 5 percent of whatever is that GDP growth rate number. These are all rough calculations,” Santos explained.

The recovery in exports, owing to the pull-up effect of the global economic recovery, is expected to contribute significantly to growth. This will be supported by the recovery in electronics exports.

Santos also sees a base effect on exports since exports growth last year was really low. Exports started contracting in late 2008 but hit the lowest growth in January of 2009, with a contraction of 40 percent.

In the January to November 2009 period, exports were still contracting by 24.6 percent to $35.004 billion from $46.403 billion registered during the same 11-month period in 2008.

On the other hand, Santos said the only dampening effect would possibly come from higher oil prices. Santos said that while the DBCC assumes that Dubai crude could be within $70 to $90 per barrel, oil prices could easily increase. He said this will be brought about by the global recovery.

“While oil prices have a dampening effect on economic growth, there are other factors which would push up economic growth—the recovery of our exports, principally electronics, and the increasing offshoring and outsourcing businesses here, and then increasing OFW (overseas Filipino worker) remittances which, as you know, boost consumption,” Santos said.

The Neda chief also sees some recovery in agriculture. While the sector is expected to be severely affected by the El Niño phenomenon in the first quarter of 2010, the government’s cloud-seeding program, among other measures, is seen to contribute to its recovery.

Earlier, the Department of Agriculture (DA) said it is setting aside P570-million intervention measures for the palay sector to offset the effects of the El Niño dry spell on rice production.

This amount is part of the P1.7 billion the DA will realign from its regular budget in 2010 to carry out measures to reduce expected production losses in agriculture.

Of the P570 million, Agriculture Undersecretary Bernie Fondevilla said P40 million will be spent for cloud-seeding over 342,043 hectares of watershed areas, and the rest, for setting shallow tube wells and pump irrigation system open-source servicing 18,000 hectares of land.

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