Weak exports, remittances, FDIs to drag RP growth: Economist

Published by rudy Date posted on June 25, 2009

MANILA – The slowing growth pace of exports, remittances, and foreign direct investments (FDI) will pull the country’s economic growth to a range of -1 and 1 percent this year, an economist said Thursday.

According to University of the Philippines professor and former budget secretary Benjamin Diokno, these three key economic indicators showed how the global slowdown has continued to batter the economy.

“The effects of the crisis in the Philippines were seen in exports, remittances, and foreign direct investments. Exports have declined, remittances from overseas Filipinos have slowed, and foreign direct investments have decelerated,” he said in a press briefing on Thursday.

Merchandise exports, which account for 40 percent of the local economy and a major employer, have been plunging at a range of 30 to 40 percent for the past seven months. FDIs, on the other hand, have suffered an 83.5-percent decline for the first three months of the year.

Remittances, meanwhile, have only grown less than 5 percent for the past months, compared to double-digit increases in the previous years.

Given these dismal economic figures, Diokno projected a growth range of -1 and 1 percent for the year, adding that it may take years for the economy to return to pre-crisis levels. Exports are seen to post a 30-percent decline this year, while remittances are seen to drop by 5 to 10 percent.

Foreign direct investments, on the other hand, are expected to hit only $500 million this year, lower than the central bank’s forecast of $700 million.

“Lower foreign direct investments mean lower long-term growth,” Diokno said.

The country’s economic managers have already downscaled their growth targets to a range of 0.8 percent and 1.8 percent for 2009, following the meager 0.4-percent gross domestic product growth for the first three months of the year.

The government has earlier projected a growth range of 3.1 to 4.1.

Recommendations

According to Diokno, the P330-billion stimulus package has not been effective due to the government’s lack of transparency and fiscal accountability.

“There are necessary conditions for the government’s stimulus package to work. There should be high labor content, local government participation in project implementation, transparency, and fiscal accountability,” he stressed.

Rather than focusing too much on this, he urged the government to engage in long-term economic reforms to help the Philippines recover from the crisis.

Specifically, the former budget secretary urged the government to diversify exports, revisit the country’s labor export policy, adopt and implement strong population management, and reform the tax system and budget process.

“We should diversify exports due to changing consumer behavior, enact the Reproductive Health bill, increase the tax on consumption, and lower the tax on income,” Diokno said, adding that the government should pay attention to the food production sector, as this will greatly contribute to economic growth.

Meanwhile, he also called on consumers and firms to “think strategically in order to benefit greatly, or get hurt minimally from the emergence of a new economy.”

Diokno was referring to the rise of a “new economic landscape,” where there will be a shift to renewable sources of energy from fossil fuels, and where there will be more government intervention.

“The design and development of cities will change, driven by the desire to conserve energy. Smarter, more fuel-efficient homes will be on demand. Smaller, smarter, and greener cars will rise, showing a leaner car manufacturing city,” he said. –Karen Flores, abs-cbnNEWS.com

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