Worst over for RP economy

NEDA: Global recovery will take time
 
The global crisis is not over, but the worst is over for the Philippine economy,” a senior economic official said on Wednesday.

Dennis Arroyo, the director of the national planning and policy staff of the National Economic and Development Authority (NEDA), though, added that while the global economy seems to be “turning the corner,” the recovery will take time.

Practically the same rosy picture was painted on Tuesday by another NEDA official.

“The [global] crisis is not over, but the worst is over for the Philippine economy,” Economic Planning Undersecretary Rolando Tungpalan told a Cabinet meeting led by President Gloria Arroyo in the central city of Mactan in Cebu province.

“The global economy seems to be turning the corner but the recovery will take time,” Tungpalan added. He was named by Malacañang also on Wednesday as one of two new spokesmen.

The Development Budget and Coordinating Committee expects the economy to grow between 3.1 percent and 4.1 percent in 2009, lower than the actual growth of 7.2 percent in 2008.

Despite the global crisis, spending by Filipino consumers is likely to be resilient this year, driven by a growth in cash transfers from overseas Filipino workers (OFWs) and a low inflation rate, NEDA’s Arroyo told reporters.

And in spite of plunging exports and foreign direct investment, the country’s dependence on external demand is “comparatively smaller relative to its Asian peers,” Bangko Sentral ng Pilipinas said in a monthly newsletter published also on Wednesday.

The energy and tourism sectors would drive labor demand abroad, Bangko Sentral added, while on the domestic front, the booming business process outsourcing industry should prosper despite the difficult external environment.

“Subsidizing inflation augurs well for consumer spending in the second quarter to the fourth quarter [of 2009],” NEDA’s Arroyo said.

The National Statistics Office earlier reported that consumer prices in April slowed down to 4.8 percent from 8.3 percent in the same period last year and from 6.4 percent in March.

From January to April, inflation was 6.4 percent, slightly lower than the 6.5 percent in the same period last year.

The easing inflation has led analysts to predict that Bangko Sentral ng Pilipinas will cut interest rates.

Because of the lower inflation, the purchasing power of the peso in the Philippines improved by 3 centavos to P0.63 in April from P0.66 in the same period last year.

In Metro Manila, the buying power of the currency was P0.64 and outside Metro Manila, P0.63.

For 2009, the government expects inflation to average between 3 percent and 5 percent.

Besides lowering inflation, NEDA’s Arroyo said that OFW remittances would boost consumption this year.

“OFW inflows will most certainly grow, not contract,” he added.

The Bangko Sentral earlier projected OFW remittances to be flat this year, while the World Bank expected a 4-percent contraction.

But also on Wednesday, Bangko Sentral said the cash transfers to the Philippines by its nine million overseas workers should remain steady and drive private consumption to ensure economic growth this year.

It added that the remittances, which in 2008 rose 13.7 percent from a year earlier to $16.429 billion, “are expected to be steady and will continue to drive consumption and growth.”

“The Philippines’ young and economically active population has propelled economic growth even in difficult times,” Bangko Sentral said.

It noted that private consumption, which accounts for more than 66 percent of the economy, shrank only once in 30 years—when Manila defaulted on foreign debts in 1985.

Foreign analysts, including the World Bank, have warned that the cash transfers could dry up as host nations shed jobs amid a global economic downturn.

The remittances account for more than 10 percent of the economy, as measured by the country’s Gross Domestic Product (GDP). A proxy for economic output, GDP is the total value of goods and services produced in a country in a year.

The International Monetary Fund has forecast zero growth this year from 4.6 percent last year, while Fitch Ratings forecast 0.1-percent growth.

But Manila had insisted that it can post 4.0-percent growth with the help of a P330-billion ($6.98 billion) stimulus package, equivalent to 2.5 percent of GDP.

OFW money sent home also has been an important driver for both external financing and consumer spending.

From January to February, remittances were up by 2.5 percent to $2.6 billion.

There are about 8.7 million OFWs in more than 200 countries, with the bulk of remittances coming from the US, where Filipinos make up 32 percent of the total number.

NEDA’s Arroyo said that deployment to the Middle East would push remittances higher in the second half of 2009. He cited the 15,000 to 20,000 jobs offered in Guam, 60,000 in Saudi Arabia and 20,000 in Qatar.

The senior economic official noted that only 6,695 OFWs have been laid off, compared to the 3,000 deployed daily.

He said that local layoffs sharply dropped in April to 1,026, compared to the 14,512 in March. From October last year to April 17, the total number of workers displaced stood at 63,630. — Darwin G. Amojelar, Reporter, Manila Times with AFP