Manila may slash economic forecasts as outlook worsens

THE Philippines may cut its forecasts for this year’s exports and inflation as the global recession deepens, forcing the government to increase spending and threatening to widen the budget deficit, an official said yesterday.

The government might change its exports estimate to a contraction of between 3 percent and 5 percent, from a growth of as much as 3 percent now, Finance Undersecretary Gil Beltran said.

The inflation forecast might be cut to between 3 percent and 5 percent from a range of 6 percent to 8 percent now.

“The global picture is grim and it may last until 2010,” Economic Planning Director Dennis Arroyo said in a separate telephone interview.

“We’re studying how lower inflation and the drop in exports will affect growth.”

The two officials made their statement even as the Agriculture Department said the Philippines, the world’s biggest rice importer, might miss its production target for the cereal this year.

Production of rough rice would increase by 3.5 percent from 16.8 million metric tons a year earlier, Agriculture Secretary Arthur Yap said.

That would be a gain to 17.4 million metric tons, below a government target of 17.8 million metric tons set in October.

But Yap declined to comment on the impact of slower production growth, saying “all figures are tentative and preliminary.” An official forecast would not be released until March 15, he said.

The Philippines bought 2.3 million metric tons of milled rice from abroad in 2008.

The growth of the Philippines’ gross domestic product may slow to as little as 3.7 percent this year, which would be the weakest pace since 2001, according to the government’s latest estimate.

Beltran said the government was considering widening its 2009 budget-deficit target as revenue dwindled and it increased spending to counter a worse-than-expected economic slump.

“Our GDP growth target was based on 2-percent global growth, but the latest estimate of that is 0.5 percent,” he said.

The International Monetary Fund recommended a higher deficit ceiling of up to 2 percent of GDP, and “the government is studying that along with other targets,” Beltran said by telephone.

The government now expects a budget shortfall of P102 billion, or 1.2 percent of GDP in 2009.

“A higher deficit, should it be approved, is mainly due to lower revenues and also the need for additional spending,” Beltran said.

Exports plunged 40.4 percent in December from a year earlier. Remittances from overseas Filipinos might dwindle, hurting consumer spending, along with company profits needed to boost tax revenue.

An estimated 800,000 Filipino workers at home and overseas might be displaced by the global slump, Arroyo said.

Imports might be unchanged this year, compared with the government’s latest estimate of 3 percent to 5-percent growth, Beltran said.

The government’s estimate for the average price of Dubai crude oil might change to $50 a barrel from $75 to reflect falling prices, he said. The Philippines imports almost all of its oil needs.

The 91-day Treasury bill yield might average 5 percent instead of 5.5 percent as the central bank cut interest rates, the finance official said. — Clarissa Batino, Bloomberg