Government lowers growth target to 0.8-1.8%

MANILA, Philippines – Government economic managers lowered yesterday the country’s economic growth projection for 2009 to between 0.8 percent and 1.8 percent from the earlier target of between 3.1 percent and 4.1 percent on account of the larger impact of the global financial crisis.

“It’s still positive because we believe consumer spending will pick up in the succeeding quarters,” Socioeconomic Planning Secretary Ralph Recto said following a meeting of the interagency Development Budget Coordination Committee (DBCC).

The DBCC, the group that sets the country’s macroeconomic assumptions, also revised the gross domestic product (GDP) growth target to 2.1 percent to 3.1 percent from 2.8 percent to 3.8 percent previously.

Earlier, the International Monetary Fund (IMF) announced that it had revised its GDP projection for the Philippines to a contraction of one percent from a previous projection of zero growth.

But Malacañang downplayed IMF’s unfavorable predictions on the economy saying that the figures were based on assumptions that are not totally accurate.

Recto said that the DBCC chose to keep the 2009 economic growth projection for the country at positive levels on the expected flat growth of remittances from overseas Filipino workers and lesser contraction in export sector.

The revised economic growth projection would result in a larger budget deficit for 2009 of P250 billion from P199.2 billion.

Finance Secretary Margarito Teves said the government would borrow more to finance the larger deficit.

“Due to lower revenues, there will be an increase in borrowings. We are thinking of an increase in ODA (official development assistance),” Teves told reporters.

He also said that despite the adverse impact of the lower growth on revenue collection, the government would keep its level of spending to help us sustain modest economic growth.

“Despite the adverse impact of the lower growth on our revenue collection, we are keeping our level of spending to help us sustain modest economic growth,” Teves said.

Bangko Sentral ng Pilipinas (BSP) Deputy Governor Guinigundo, for his part, reiterated that the monetary authorities would continue to ensure the availability of liquidity in the market consistent with non-inflationary growth.

The BSP cut policy rates last month by 25 basis points to 4.25 percent for the overnight borrowing rate and 6.25 percent for the overnight lending rate.

In the first quarter of the year, GDP grew by only 0.4 percent. 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 0.4 percent is significantly below the government’s first quarter growth projection of 1.8 percent to 2.8 percent and below the adjusted 3.9 percent GDP expansion recorded in the same period last year.

Meanwhile, President Arroyo said she was counting on China, Manila’s number-three trading partner after the United States and Japan, “to lead us towards recovery.”

She said China’s manufacturing was stabilizing, housing and car sales were growing, and imports of iron ore and raw materials were turning around.

“Recession or no recession, as the world’s biggest developing country, China is taking its place in the global stage to ensure that the interest of developing countries are protected and promoted,” she told Chinese-Filipino businessman in a speech.

“And as China leads everybody out of the global economic crisis, the Philippines is one of those that benefits the most,” she added.

The Philippines suffered a foreign direct investment outflow of $27 million in March as the global downturn lengthened the BSP said.

FDI flows for the three months to March fell 83.5 percent to $44 million compared to a year earlier, it said. — Iris C. Gonzales, Philippine Star