EIU pessimistic, expects economy to shrink 0.6%

The government is closely watching the current economic situation and is ready to revise its growth projections again if “hard numbers” come up, the National Economic and Development Authority said.

Neda deputy director general Rolando Tungpalan issued the statement following new forecasts made by international groups about the possibility of a zero growth or even contraction in the Philippine gross domestic product this year.

The Economist Intelligence Unit sees the Philippine economy contracting 0.6 percent in 2009, before posting a growth of 1.6 percent next year.

“The global recession will not leave the Philippines unscathed. We expect the economy to shrink for the first time in 10 years, with real GDP down by 0.6 percent, as exports of goods and services decline by 8 percent owing to weaker global demand,” the London-based think tank said in its latest forecast.

“Gross fixed capital investment will contract for the first time since 2005 as inflows of foreign investment dry up and local companies find it harder to raise capital on international markets.”

The EIU said weaker external demand and domestic investment would lead to higher unemployment and constrain consumption growth. Furthermore, inflows of remittances that support consumption will weaken as the slowdown in the US, the source of one-half of remittances to the Philippines, reduces the amount of money that overseas workers can repatriate.

Meanwhile, the International Monetary Fund said the Philippines would post a zero growth this year, reflecting the prospect of a significant contraction in exports and imports.

Tungpalan said the Development Budget Coordinating Committee and the economic managers were closely monitoring global economic developments, including indicators from global partners such as the IMF. These promoted the committee to prescribe economic policies that support positive Philippine economic growth amid turbulent global economy, he said. –Roderick T. dela Cruz, Manila Standard Today