Weak exports, underspending saps Philippine economy in 2011

Monday, January 30, 2012

PUBLIC underspending on infrastructure and weak export receipts sapped the country's economic growth in 2011 after posting only 3.7 percent, just half of the 7.6 percent expansion registered in the previous year.

However, the latest economic report still fell within the government's official projection of 3.6-4 percent, Socioeconomic Planning Secretary Cayetano Paderanga said.

Have something to report? Tell us in text, photos or videos.

As in the previous quarters of 2011, Paderanga said the fourth quarter economic performance also at 3.7 percent was affected by negative external developments, including the European debt and economic woes, the weak recovery of the US economy, and the supply chain disruptions due to the flooding in Thailand.

An earlier report from the Chamber of Automotive Manufacturers of the Philippines Inc. (Campi) show that most local automobile dealers import both units and parts from Thailand, considered as the automotive hub in the East Asian region.

"However, according to the World Bank, the recovery of production to the pre-crisis level will continue to be affected by the conditions of the global demand for cars and electronics, despite reconstruction efforts to restore order in the supply chain," Paderanga, who is also the director general of the National Economic and Development Authority (Neda), said.

Overall, exports of goods contracted by 10.8 percent in the fourth quarter, which in turn led to a 5.5 percent contraction in total goods and services exports, the latter comprising almost 50 percent of gross domestic product (GDP).

Compounding the country's economic slowdown were the effects of strong storms such as Pedring, Quiel, and Sendong as Neda estimates the total damages caused by these storms at 0.63 percent of the country's GDP.

Agriculture, which fell 2.5 percent in the fourth quarter, accounts a fifth of the country's economy.

However, household consumption posted a growth of 6.7 percent, driven by continued inflow of remittances, holiday spending, and the continued implementation of the conditional cash transfer program for poor families.

On a full-year basis, public construction contracted by 29.4 percent. There was rapid acceleration in public construction expenditure, which grew by 49.4 percent in the fourth quarter, but University of the Philippines (UP) economist Benjamin Diokno just attributed this to base effect.

"Public construction in the fourth quarter of 2011 is being compared with public construction in the fourth quarter of 2010 which started to slow as the Aquino administration undertook comprehensive review of public construction," he said in an email.

Looking forward, Paderanga is optimistic that the acceleration of public expenditures will continue well into 2012 and beyond.

As of January 12, 2012, the Aquino administration has released 72.1 percent or P150.2 billion of the P208.3-billion allocation for capital outlays for various infrastructure projects of different agencies like Department of Public Works and Highways, Department of Education and Department of Agriculture.

The country's economy may grow anywhere from 5 to 6 percent in 2012 supported by increased infrastructure and social services spending, Budget Secretary Florencio Abad had said.

"I beg to disagree. For 2012, growth would range from 4 to 5 percent. Growth would be supported by government spending, consumption, and domestic capital formation," University of Asia and the Pacific economist Cid Terrosa told Sun.Star.

In 2010, the $200-billion Philippine economy as measured by the World Bank surged to its highest level in 34 years due to massive election spending and renewed business confidence. (Sunnex)