Philippines ‘to miss economic target’ this year

Monday, November 28, 2011

EFFECTS of a series of typhoons and weaker global trade will cut the Philippines' chances of keeping its growth target this year, economists said Monday.

University of the Philippines (UP) economics professor Benjamin Diokno and University of Asia and the Pacific (UA&P) economist Cid Terrosa have expressed the same sentiments that it will be an uphill climb for the government to achieve the 4.5-5.4 percent official target.

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"It’s close to impossible. The economy has to expand 7.2 percent for it to achieve the lower end target of 4.5 percent. But with the farm damages owing to recent floods, slower manufacturing owing to exports plunge, and weak construction, such a strong growth is highly improbable," Diokno told Sun.Star.

The domestic economy has decelerated for the third consecutive quarter from 7.3 percent during the July-September 2010 period to 3.2 percent this year, according to the National Statistical Coordination Board (NSCB).

Overall, growth in the first nine months of 2011 is at 3.6 percent, quite a distance even from the lower end of the full-year target of 4.5 percent.

Last year, the economy surged to its highest in three decades at 7.6 percent on the back of robust election spending and business confidence in the Aquino administration.

"On the demand side, consumer spending bolstered growth but construction continued to suffer from the much delayed implementation of the public-private partnership program while export of goods really got hit by the global crisis, posting a double digit decline for the first time since the second quarter of 2009,” the NSCB said.

Despite efforts to ramp up government spending, official data show that actual expenditures net of debt service continue to lag program spending by as much as P195 billion -- P847 billion versus P1.04 trillion -- as of the end of the third quarter.

Earlier, Finance Secretary Cesar Purisima said a further uptick in disbursement may be felt toward the end of the year with the goal of boosting economic growth and alleviating poverty while keeping the fiscal situation in check.

President Benigno Aquino III also unveiled a P72-billion expenditure package last October that aims to speed up infrastructure and poverty alleviation projects.

Critics said, however, that the economic stimulus program will have marginal effect on public spending this year given the lack of time to carry out the projects.

“Even with this emergency spending program, it will still be difficult to catch up. I estimate that full-year growth would be about 4 to 4.3 percent,” Terrosa said.

In comparison with the Asian neighbors, the Philippines’ third quarter economic performance is weaker compared to Indonesia’s 6.5 percent, Vietnam’s 6.1 percent, Singapore’s 6.1 percent, Malaysia’s 5.8 percent, and Thailand’s 3.5 percent.

Moreover, the third quarter growth performance is below the 4.6 percent consensus forecast of both international and domestic analysts, including Neda’s forecast of 3.8 to 4.8 percent.

There are indications, however, of more favorable prospects for the fourth quarter of 2011, Socioeconomic Planning Secretary Cayetano Paderanga said in a statement.

Among others, growth may be supported by anticipated higher demand due to the Yuletide and harvest seasons; a steady consumer sentiment; the continued inflows of remittances from overseas Filipino workers; and the full implementation of the emergency spending program of the government.

Paderanga said private consumption will be buoyed by increased household spending in the year-end, particularly on items related to food and utilities.

“Spending will be spurred by broadly stable commodities’ prices. In addition, consumer sentiment will be more optimistic, and this will be carried over to 2012,” he said.

The upbeat expectations of the private sector for the next quarter will particularly boost construction and durable equipment, according to the planning chief.

Risks to growth, meanwhile, include the further deterioration of the sovereign debt problems in Europe and economic slowdown in the US.

At home, the government’s concerns are the acceleration of public spending and strategies/programs/projects on how to stimulate domestic demand while at the same time generate jobs.

Also, immediate recovery of the agriculture and fishery sectors from the devastations of the typhoons Pedring and Quiel must be given priority. (Sunnex)