Impact of crisis may last until 2012–govt

The global financial crisis has forced Philippine economic managers to lower the country’s economic targets from 2009 until the end of President’s Gloria Arroyo’s term in 2010 and beyond.

The Development and Budget Coordinating Committee on Thursday cut the gross domestic product (GDP) forecast this year to between 3.1 percent and 4.1 percent from an earlier target in February ranging from 3.7 percent to 4.7 percent.

A proxy for economic output, GDP refers to the total value of goods and services produced in a country in a year.

Last year, the economy grew 4.6 percent and in 2007, 7.2 percent.

Dennis Arroyo, director of the National Economic and Development Authority’s (NEDA’s) national planning and policy staff, blamed the cut in economic growth on the much lower projections of exports and imports, flat growth in overseas Filipino workers remittances for 2009 (as announced by the central bank), and the decline in factory output by 19.9 percent in January this year.

The Asian Development Bank (ADB) cut the country’s GDP growth forecast by 2.5 percent this year, while the World Bank predicted only a 1.9-percent growth. The International Monetary Fund saw 2.25- percent growth.

Global crisis

Socioeconomic Planning Secretary Ralph Recto also blamed the cut in GDP forecasts on the threat of lower incomes from falling exports and layoffs here and abroad. He added that those trends are forcing people to spend less.

“That’s the main reason for the reduction, but like I said, it doesn’t mean we’re throwing [in] the towel,” he added. “We’re looking at these projections. There might still be a pleasant surprise. I think the lowest growth will be in the first quarter.”

For next year, the Development Budget Coordination Committee (DBCC) predicted GDP to expand between 4.3 percent and 5.3 percent, lower than a forecast in February of between 4.9 percent and 5.8 percent.

For 2011, the economy is predicted to grow between 5.5 percent and 6.4 percent, also down from February’s forecast of between 5.7 percent and 6.6 percent. In 2012, the economy is forecast to expand between 5.9 percent and 6.8 percent, also down from an earlier prediction of between 6.1 percent and 7 percent.

Higher jobless rate

Economists interviewed by The Manila Times said more Filipinos are poised to lose their jobs because of the slower than expected growth.

“Unemployment will worsen definitely because of the lower economic growth,” Benjamin Diokno, an economics professor at the University of the Philippines, told The Times.

A former member of the Estrada administration economic team, Diokno predicted the unemployment rate to rise in April to between 8 percent and 8.5 percent.

“Definitely a higher unemployment rate [will accompany slower growth],” Victor Abola, economist at the University of Asia and the Pacific, also told The Times. “The government intervention may not [be] sufficient to offset the lost employment in the private sector, particularly the export-oriented firms.”

He projected an unemployment rate this year of between 8 percent and 9 percent.

Abola said the government could only create between 400,000 and 500,000 jobs this year, missing by a wide margin its one million annual target. He added that more jobs would be generated by government and by private construction projects, as well as the business process-outsourcing sector.

The economic managers are projecting exports to contract between 15 percent and 13 percent, a sharper reduction from an earlier estimate of a drop of between 6 percent and 8 percent.

By 2010, exports are expected to grow between 5 percent and 7 percent, down from earlier estimate of between 8 percent and 10 percent. For 2011, exports are forecast to grow from 8 percent to 10 percent; and for 2012, from 10 percent to 12 percent.

Imports are likely to contract between 14 percent and 12 percent this year. Earlier, it was projected to fall between 8 percent and 10 percent. For 2010, imports are projected to expand from 10 percent to 12 percent; for 2011, from 12 percent to 14 percent; and 2012, from 14 percent to 16 percent. –Darwin G. Amojelar, Reporter, Manila Times