The country’s slowing economy was more the result of “deep seated problems” rather than what the government has been insisting as the effects of the global financial crisis, Center for Research and Communication Foundation (CRC) president Dr. Emilio Antonio said.
Such fundamental problems in the economy require strategic responses with or without the global crisis, Antonio added.
The government, meanwhile, said yesterday it may again revisit its economic targets this year if key drivers worsen further, Socioeconomic Planning Undersecretary Rolando Tumpalan said yesterday.
The International Monetary Fund (IMF) last Wednesday forecast zero gross domestic product (GDP) growth for the Philippines this year and just one percent expansion next year.
The numbers were radically lower than the government’s downscaled targets of 3.1 percent to 4.1 percent forecast earlier this month, which was already reduced from a previous estimate of 3.7 percent to 4.4 percent.
In Antonio’s study presented before the Global Financial Crisis Forum held last Thursday, Antonio said when the country’s exports receipts started to fall in the first quarter of last year, most countries in the region were still posting double digit percentages in exports growth.
“It was less a matter of demand but more a question of supply capability” he said of the inability of local producers to match the exports growth of their peers in the region.
He said this means the local exports market is not competitive enough to mass produce goods and deliver these based on the demands of huge markets like the United States.
Local export firms had blamed the lack of government support primarily in terms of financing for their failure to ramp up production to meet huge orders.
Vietnam, China, Taiwan, Korea, India, Singapore, Thailand, Indonesia and Malaysia were all posting substantial growth in exports until the third quarter of last year when the subprime credit crisis hit the US. Export growth in the Philippines then, in contrast, was already on a slowdown, he said.
In formulating policies to address the impact of the current global economic slowdown, Antonio said the focus should be on lifting the competitiveness of the export sector. Lack of confidence among local entrepreneurs, unemployment and underemployment problems, and shrinking dollar remittances from overseas contract workers also contributed to the weakening economy.
He said lack of confidence among local producers holds back growth particularly in the area of investments both from foreign and local investors.
“Despite improvements in the nation’s financial health, foreign loans and investments still come in trickles,” he added.
Indirectly, however, the country is still catching the effects of the global crisis with reduced financial flows from investments and foreign loans; reduced demand for goods and services from other countries that brings exports and remittances down.
He also highlighted in his analysis three key indicators of the country’s macroeconomic health like the absence of serious current account deficit, relatively healthy cash position, and a more favorable outlook of lenders.
“The Development Budget Coordination Committee and the economic managers are closely monitoring global economic developments including indicators from global partners like the multilateral organisations,” Tungpalan said.
Further revisions would be made if and when there are “hard numbers” to back them up, he said in a statement.
Tungpalan said the government’s revised forecasts had factored in lower world output projections, flat growth for 2009 salary remittances by Filipinos working abroad, lower exports, and depressed manufacturing.
“Nonetheless, these assumptions show that the economy is still expected to post a positive growth rate, and the government is undertaking initiatives to ensure that this level of growth is realised,” Tungpalan said.
“Remittances still managed to grow by 4.9 percent in February 2009, and deployment of overseas Filipino workers even posted growth of 30.2 percent compared to 25.3 percent in January,” he added.
The country expects 2009 exports to contract by between 13 and 15 percent, while imports are expected to decline by 12 to 14 percent.
February imports plunged 32 percent from a year earlier to $3.06 billion, government data released yesterday showed.
Electronics components, which made up 35.1 percent of total imports, suffered a 42.9 percent drop to $1.074 billion, signalling further bad news for the electronics sector.
The imported components form the basis of the electronics products which make up more than half of the country’s exports, indicating shipments will continue to slacken.
Fuel and lubricants, the second-largest imports, also fell 42.7 percent in February to $483.9 million, the National Statistics Office (NSO) said in a statement.
The drop was widely within economists’ projections, said Jose Vistan of AB Capital Securities who expected imports to improve in the coming months after indications that developed countries’ economies had bottomed out.
“There are early signs of a bottom, although it’s too early to conclude a bottom. So the level of decline in our imports could slow down to 20 percent, and so on,” Vistan told Dow Jones Newswires.
“We may have seen the worst in percentage drop,” he said.
However Radhika Rao, an economist from IDEAglobal Ltd., did not expect imports to recover until exports rebound.
“With much of intermediate goods intended for re-exports making up a substantial part of import volumes, until the export end recovers, we don’t expect any respite from weak data on this front,” Rao said.
Despite the fall in imports, the country’s trade deficit in February rose 31 percent to 552 million dollars. The government earlier announced that exports fell 39 percent to 2.51 billion dollars in February.–Ayen Infante, Daily Tribune
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