RP will not go into recession, says Palace

MANILA, Philippines – The Philippines will not go into recession despite the slow growth registered in the first quarter of the year, Malacañang said yesterday.

Deputy Presidential Spokesman for Economic Affairs Rolando Tungpalan issued the statement following warnings from the National Statistics Coordination Board (NSCB) the country was on the verge of recession with the 0.4 percent gross domestic product (GDP) growth from January to March this year.

Tungpalan, who is also deputy director general of the National Economic Development Authority (NEDA), however, refused to openly dispute the NSCB statement.

He said that while the NSCB is under NEDA, the latter agency would want to keep the statistics board as independent as possible. An economy is considered in recession if it posts two consecutive quarters of negative growth.

“We don’t see why the April to June (economic) performance will not be better,” Tungpalan told a news briefing. “In simple terms, from January to March, there was a lot of uncertainty and that was the pervasive atmosphere felt by the business community and families.”

“The President was concerned and wants to stress that we are not in a recession,” Deputy Presidential Spokesman for Economic Affairs Prof. Gary Olivar said in the same news briefing.

He said “real spending” by the government for infrastructure programs is taking place this quarter after President Arroyo ordered the frontloading of at least 60 percent expenditures for 2009 be done in the first half of the year to pump prime the economy under the P330-billion Economic Resiliency Program.

He said the process took some time due to procedures like bidding. A check with the Department of

Public Works and Highways showed the about 95 percent of the funds have already been “obligated,” Tungpalan said.

He said the business community is also expected to increase spending towards the middle of the year. He cited the announcement of officials of mall giant SM that they are rolling out billion-peso investments this year.

Families relying on remittances from relatives abroad are also expected to spend after saving in the first few months of the year due to the economic uncertainty.

Tungpalan said there are also signs that the slowing down of exports is starting to taper off while the business process outsourcing industry continues to grow along with the deployment of Filipino workers abroad.

“The President calls on the people to maintain their optimism and be assured that the government is doing everything it can. Let us not go overboard by this adverse news, let’s look at the long haul and work together for the long term,” Olivar said.

US research firms to downscale growth forecast for RP

The country’s full-year economic growth may fall below 2.5 percent, as gross domestic product (GDP) grew by only 0.4 percent in the first quarter of the year, GlobalSource said in its latest report on the Philippines.

The New York-based research firm said that because of lower-than-expected first quarter growth, it would have to revise downward its previous GDP forecast of 2.5 percent for 2009 which is already below the government’s official forecast of 3.1 percent to 4.1 percent.

GlobalSource said that the sharp slowdown in consumer spending, coupled by a drop in investment pulled down economic growth.

Capital formation deteriorated by 16.5 percent year-on-year as firms cut their spending on durable equipment. On the other hand, private consumption growth visibly slowed to 0.8 percent from 5.1 percent a year ago, the weakest performance registered in over two decades.

“Given the developments, especially as it is personal consumption spending (comprising roughly 80 percent of GDP) that has surprised most on the downside, our full-year growth forecast of 2.5 percent which we had computed in the beginning of the year no longer appears to be viable and we are inclined to undertake downward revisions in our subsequent reports,” said GlobalSource in its report.

On Thursday, the National Statistical Coordination Board (NSCB) reported that the Philippines may slip into a recession this year as GDP grew by only 0.4 percent in the first quarter of the year compared to the same period in 2008.

The economy shrank by a seasonally adjusted 2.3 percent from the last three months of 2008, its lowest level recorded for the past 20 years, the NSCB also reported.

GlobalSource said the government’s fiscal stimulus program of P330 billion only modestly helped support growth in the first quarter.

Government consumption expanded by just 3.8 percent while public constructed dipped by 4.4 percent.

Even dollar remittances from overseas Filipino workers (OFWs) have failed to boost consumer spending, GlobalSource said.

As such, the New York-based think-tank said the Philippine economy needs greater support from both monetary and fiscal policy.

Monetary authorities on Thursday cut interest rates by 25 basis points to 4.25 percent for the overnight borrowing rate and 6.25 percent for the overnight lending rate. – Paolo Romero with Iris Gonzales, Philippine Star