YEARENDER: Recovery of exports marked economy’s resiliency in 2010

MANILA, Philippines – Emerging from a tumultuous 2008 and 2009 when the Philippines was   battered by the global financial crisis, Filipinos expected 2010 to be a year of optimism and good prospects.  

Did it actually meet expectations?

Socioeconomic Planning Secretary Cayetano Paderanga Jr. believes so.

He believes that the resiliency of the Philippine economy glistened   most this year with the recovery of exports.

However, as is the perennial problem in the Philippine economic landscape, the expansion of gross domestic product (GDP) is still not enough for it to trickle down to the grassroots and to be felt by each and every Filipino.

As presidential candidate Gilbert Teodoro said when he was campaigning during the 2010 elections, economic growth should at least be 10 percent for a period of 10 years so that it would be truly felt by the people.

According to the latest data from the National Statistical Coordination Board, the Philippine economy, as measured by GDP grew by 6.5 percent year-on-year, following a revised strong growth of eight percent in the first half of 2010.

With this robust third quarter growth, Paderanga said the economy   would exceed the five-to six-percent growth target for the year set by the Development Budget Coordination Committee (DBCC), theinter-agency group that sets the country’s macroeconomic assumptions and targets.

“We expect growth to moderate in the second half of 2010 but we remain quite optimistic that we will exceed the five to six percent target that was approved by the DBCC for 2010,” Paderanga said.

He said the Philippine government would continue with the formulation and implementation of the needed policies and reforms that would keep the economy afloat amidst a “fragile world economy.”

The third quarter growth of 6.5 percent, although 0.2 percentage points below the low-end forecast of the National Economic and Development Authority (NEDA) is well within the market expectations of six to 7.5 percent, Paderanga also said.

Citing data from other countries, the Socioeconomic Planning chief noted that the third quarter growth of the economy was higher than that of Indonesia (5.8 percent), Malaysia (5.3 percent), and South Korea (0.7 percent).

On the other hand, the Philippines continued to trail the economies of China (10.6 percent), Singapore (10.6 percent), Vietnam (7.2 percent), Thailand (6.7 percent), and Hong Kong (6.8 percent).   Paderanga attributed economic growth to the continued growth in the industry and services sectors.

This, he said, cushioned the decline in agriculture where weather disturbances resulted in the contraction of production in crops, particularly palay, corn, sugarcane, and coconut, as well as in the   livestock sub-sectors.

“The growth in industry and services was largely fueled by both strong foreign and domestic demand. The further expansion in intra-regional   economic activity within the Asian markets provided the main impetus for the strong exports growth,” Paderanga said.

In October, total earnings of exports amounted to $4.74 billion, which is 26.4 percent higher than last year’s level.

NEDA dubbed the October exports performance as the “highest exports growth” in Southeast Asia for the month.

October exports brought the January to October export performance to $43 billion or 37.1 percent higher than in the same period last year.

Paderanga said the Philippines is likely to exceed its target of 15 percent exports growth for the year.

“With this, we are very likely to exceed our target of 15 percent exports growth this year, since only $1.4 billion is needed for the   two remaining months to achieve the target,” Paderanga said.

The non-government think-tank IBON Foundation, however, brushed aside this numbers, saying that in terms of the fundamental policies, the government remains dependent on dollar remittances from overseas Filipinos to boost economic growth.

Indeed, dollar remittances continue to push economic growth.

Private consumption expenditure remains strong, growing by 4.2 percent year-on-year in real terms, on the back of an improving employment situation.

The expansion in the third quarter was lower than the revised GDP growth of 8.2 percent in the second quarter and 7.8 percent in the first quarter but officials attributed this to baseline effects due to election-related spending in May.

Because of the strong performance of the economy as of the third quarter of the year, analysts believe that the Philippine economy may grow anywhere from five percent to 5.5 percent in 2011 on expectations that dollar remittances from overseas Filipinos would continue to remain robust.

New York-based Global Source, in its latest report on the Philippines released this month said that growth is expected at around five to 5.5 percent in 2011 given continued strong dollar remittances and corporate earnings and high business confidence and trust in the new administration.

This projection is within the official forecast growth set by DBCC of five percent for next year. The report, co-authored by former Finance Undersecretary Romeo Bernardo also said that the low interest rate environment in the country remains conducive to growth as it would encourage banks to lend which, in turn, would encourage economic activity.

Global Source said growth may have already begun to moderate as fiscal stimulus injected by the government had begun to fade.

“Growth may already have begun to moderate, with seasonally adjusted output shrinking by 0.5 percent during the third quarter from growth of 1.4 percent previously. This has been a regional trend where other Asian economies have similarly lost momentum,” Global Source said.

The think-tank had expected growth to slow down next year because of the disappearance of one-time growth drivers such as election-related spending this year.

Nevertheless, Global Source said it continues to see a 6.5 percent to seven percent growth for this year given the 6.5 percent economic growth in the third quarter and the 7.5 percent cumulative growth for the first three quarters.

But IBON says what is needed is a change in economic policies and not a strong focus on labor-export policies. It said that government should develop local industries and provide enough gainful opportunities here so that Filipinos do not have to leave their families to work abroad. –Iris C. Gonzales (The Philippine Star)