Gov’t think-tank sees ’09 growth at 4.3%

The Philippine economy as measured by the gross domestic product (GDP) will grow 4.3 percent this year even if the global financial crisis worsens, a government development think-tank said.

In its latest report, the Philippine Institute for Development Studies (PIDS) says its GDP forecast depended largely on a stable inflow of foreign exchange remittances from overseas Filipinos that will support a consumption growth rate of 4.5 percent and a steady growth in the services sector.

Preliminary central bank data estimate remittances at $16.4 billion in 2008, up 13.7 percent from $14.5 billion in 2007. The numbers don’t include remittances through non-formal channels.

The GDP projection also depends on a boost in public construction activity and a contained slowdown in the manufacturing sector, PIDS said.

“These conditions are fairly reasonable and even if external conditions deteriorate further, GDP growth in 2009 is not likely to fall below four percent,” said PIDS president Josef Yap, author of the report.

Yap said the resiliency of the Philippine economy was ironically buoyed by the low contribution of exports to GDP.

Exports have been declining because of reduced demand in recession-hit advanced economies like the United States and Europe. Exports to the United States fell from a peak of 34 percent of total Philippine exports in 1998 to 16 percent last year.

Yap said the role of foreign direct investment (FDI) inflow — which is very low as compared with FDI inflows into neighboring countries — also had not been a source of economic growth to the same degree as in some East Asian economies, like Vietnam and Thailand.

Yap said that if there would be no global recovery in 2010, the Philippines would be hard pressed to adopt policies that would not be subject to economic boom-and-bust cycles without sacrificing macroeconomic stability.

“By then, fiscal resources would be severely limited and much attention will be on the 2010 presidential election,” he said. Edited by INQUIRER.net