Monday, 29 November 2010

GDP lessons

Manila Standard

The economy, as measured by the gross domestic product, will likely post a full-year growth of 7 percent this year, a respectable performance given the slow recovery in the major markets like the US and Europe.

Philippine economic growth actually slowed in the third quarter, and to 6.5 percent after a robust expansion of 7.9 percent and 8.2 percent in the first and second quarters, respectively. But all the economy must do now is to expand by at least 5.4 percent in the last three months to attain a growth of 7 percent for the full year.

Holiday spending in the run-up to Christmas and the relatively heavy remittances sent by migrant Filipino workers will ensure brisk economic activity in the fourth quarter. Private consumption will likely be the key driver in the fourth quarter after the Arroyo administration spent a great deal of the budget to pump-prime the economy in the early part of the year.

By now, the current administration must have learned a few lessons in the third-quarter GDP performance. Growth slowed in the third quarter because of diminished government spending, the contraction in the agriculture sector because of the dry spell, and a significant decline in the mining and quarrying industries.

The economy clearly still needs pump-priming, and President Aquino should be aware that deficit spending will be part and parcel of a robust economic expansion. His predecessor front-loaded spending in the first six months of the year, resulting in strong growth.

There is no reason why President Aquino should not emulate what President Arroyo did in the first two quarters of the year. Economic sense dictates that the present government should still spend heavily to nurture growth.

President Aquino must also aggressively put the mining industry back on track. The mining sector directly generates employment in the host community and earns foreign exchange. More farm-to-market roads, bridges and storage facilities, meanwhile, must be given the highest priority to increase agriculture production and offset the effects of destructive typhoons and other weather patterns on farms.

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