MANILA, Philippines – The country’s economic managers are sticking to the 3.7-4.7 percent growth target for the gross domestic product (GDP), saying the growth momentum would continue in 2009.
The inter-agency Development Budget Coordinating Committee (DBCC) is in the thick of discussions on whether the economic growth target could be adjusted in light of the rapid revisions in growth projections worldwide.
The National Economic and Development Authority (NEDA) said the country’s GDP growth would not fall below the low-end target of 3.7 percent for this year.
But the Bangko Sentral ng Pilipinas (BSP) said there was scope for revising the target especially after the International Monetary Fund admitted that major economies would fall into actual depression this year.
“The crisis began in September and hit hard in October, November and December,” said NEDA spokesman Dennis Arroyo. “Hence, the fourth quarter of 2008 was already in the crisis era. Yet, the economy still grew by 4.5 percent.”
Arroyo also said the 2009 GDP target range of 3.7-4.7 percent assumed merchandise export growth of one to three percent. He stressed that in the fourth quarter of last year, exports growth was at negative 9.2 percent.
“One would have expected the economy to post growth lower than 3.7 percent,” Arroyo said. “But what happened was that manufacturing for the domestic market compensated for the drop in exports.”
He said manufacturing growth accelerated to 3.2 percent in the fourth quarter of 2008, compared to 2.6 percent in the fourth quarter of 2007. He said the growth was buoyed by food manufacturing, beverage, chemicals and chemical products.
In 2009, the NEDA official said the manufacturing sector would be dragged down by exports but would eventually shift for the domestic economy. “There will also be a big public construction push, positive response from private construction, power sector reforms and expansion of water service areas,” he said.
But the BSP said the government’s growth target should be reviewed and possibly recast in the light of rapidly shifting global conditions that indicate a sharper slowdown than anticipated.
BSP Deputy Governor Diwa Guinigundo said there is some scope to revisit the government’s growth targets to at least re-examine if assumptions are still valid.
“Even the International Monetary Fund is doing it every week,” Guinigundo said. “I believe there is some scope for us to revisit the GDP numbers especially since everyone else’s views are also changing.”
Guinigundo said projections and targets were based on certain assumptions of how the global economy would behave in the coming months.
Because the country’s economy is deeply integrated with the global economy in terms of trade, global supply and demand would also impact the country’s growth trajectory.
“But I am not saying our target or projections are too high or too low, we just need to revalidate our numbers,” he said.
A lower growth target, however, would give the BSP an even bigger room to maneuver its monetary policy since it would not need to ease as much as it would need to if it has to support a higher growth target.
Thus far, the BSP has eased its key policy rates by 100 basis points, bringing the level back to where it was in the beginning of 2008.–Des Ferriols, Philippine Star