5-6 percent economic growth seen

IN WAKE OF MIDDLE EAST, JAPAN CRISES

THE Philippine central bank revised downwards its economic growth forecast for the country, as the Aquino administration’s economic managers braced for a slowdown amid the political tensions in the Middle East and North Africa (MENA), as well as the disaster in Japan.

Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr. said a 5-percent to 6-percent economic growth “is a reasonable figure in a situation like this.”

“The 7-[percent] to 8-percent growth has been described by the national government as the fighting target. And for budgetary purposes, a growth rate of 5 [percent] to 6 percent is a respectable growth rate for any economy,” Tetangco told reporters on the sidelines of the Chamber of Thrift Banks’ annual convention.

Separately, Socioeconomic Planning Secretary Cayetano Paderanga said the country’s economic target this year may be revised downward mostly because of the disaster in Japan and the political crisis in MENA.
Paderanga told reporters that the target of between 7 percent and 8 percent growth for the country’s gross domestic product (GDP) this year “could be” revised downward, after last year’s 34-year record expansion of 7.3 percent.

The key measure of economic output, GDP is the total value of final goods and services produced in the country.

Tetangco said recent developments have forced economic managers to put up for review the country’s macroeconomic assumptions.

“The situation in the MENA and Japan would definitely have an impact in a number of areas such as trade, remittances and investments,” he said.

Japan is the Philippines’ top trading partner, as well as the source of about a third of official development assistance (ODA) going Manila’s way, and of five percent of overseas Filipino worker (OFW) remittances.

The MENA region hosts seven in every 10 OFW, and account for about a third of total remittances.

“We have to look at trade and investments. The prognosis, though, is that the situation in Japan may be somewhat negative in the short-term. But because of the reconstruction and rebuilding programs that could be implemented, the potential impact on the economy of Japan and its trading partners is positive in the long term. The situation is still evolving. There is no definitive assessment. So, we will continue to monitor,” Tetangco said.

“We have heard from [National Economic and Development Authority] and [Department of Finance] that it is not likely that Japan will reduce its assistance to Philippines. But at any rate, there could be some negative impact, especially in the short run. But in the long run, the expectation is that the effect would be positive because of the increased expenditure for rebuilding and reconstruction,” the BSP chief said.

Besides trade and investment, remittance is also “something very relevant,” he said.

“The concentration of workers in the Middle East and Saudi Arabia has fortunately not been affected by the crisis there. But there are some areas or countries where there are OFW that have been affected. So, this implies a need for review of remittance forecast,” he added.

The BSP’s current forecast is an eight percent growth for this year.

“January figure showed 7.6 percent growth that’s still within the ballpark, but that was before the crisis in MENA started,” Tetangco said.

Despite the adverse impact of developments in the Middle East and Japan, the Philippine economy will continue to grow, he said.

“Other institutions share this forecast. This is an indication the impact of recent global developments is expected to be manageable,” he said, referring to the World Bank, which kept its growth projection for the Philippines at 5 percent for 2011 and 5.4 percent for 2012.

Benjamin Diokno, budget secretary of the Estrada administration, said that rehabilitation and reconstruction in Japan would mean “less aid for developing and transition economies.”

“It will also mean slower trade with Japan as it undergoes adjustment and recovery,” he said.

Diokno said the price of construction materials—steel, cement and others—might rise as soon as the reconstruction process starts. –BY LAILANY P. GOMEZ REPORTER AND DARWIN G. AMOJELAR SENIOR REPORTER, Manila Times