Bigger export drop feared

The government is now looking at a bigger drop in exports and imports as well as a weaker foreign exchange rate amid the global recession.

Government sources said the Development Budget Coordinating Committee would likely revise major economic targets, with exports falling by 13 percent to 15 percent this year, bigger than the 6 percent to 8 percent drop it originally forecast, as demand from the country’s trading partners weakened.

Imports would likely decline by 12 percent to 14 percent from 8 to 10 percent. Sources attributed the bigger decline in imports in part to the drop in exports, which use raw materials and intermediate goods from abroad.

The DBCC, an interagency group that maps out the country’s economic and fiscal targets and policies, met before the holidays to discuss the reduction in growth targets.

Sources said the DBCC was looking at a reduction in the gross domestic product growth to 3.4 percent to 4.4 percent from 3.7 percent to 4.7 percent. National Economic and Development Authority deputy director- general Dennis Arroyo denied 3.4 percent growth projection.

The DBCC is also considering a slightly weaker peso-dollar rate this year of 46 to 49 against the US dollar from 45 to 48. The peso averaged around 47 in the first two months of the year and started weakening to 48 in March.

Lower imports, a weaker peso and slower growth make an impact on the fiscal numbers. Collections of the Bureau of Customs come mainly from the tariffs levied on imports that are computed in dollar terms. Taxes collected by the Bureau of Internal Revenue, meanwhile, depend partly on the profits generated by companies, which are affected by the growth of the economy.

Moody’s Investors Service, in a report released over the holidays, said it expected Philippine gross domestic product growth at 2 percent, lower than government’s projection, because of anemic investments and weak exports.

“Investment has been hindered in recent years by political uncertainties, security concerns, inadequate infrastructure—notably the Philippines’ costly and inefficient power grid—and weaknesses in the rule of law,” Moody’s said in a report released last Thursday.

“Despite the slowdown, the Philippines’ growth performance will probably be better than most other countries in the Asia region, which are more heavily dependent on exports, with the exception of Indonesia, India and Vietnam,” the report said. –Eileen A. Mencias, Manila Standard Today