Underspending, fuel prices push down 2011 growth

Published by rudy Date posted on February 24, 2012

ALTHOUGH external factors like high fuel prices, slow economic recovery in the United States and the European debt crisis contributed to the 3.7 percent Philippine gross domestic product growth (GDP) in 2011, it is the export sector, government underspending and higher food and fuel food prices that became a major drag to the decline in the country’s economic growth.

According to the Philippine Institute for Development Studies (PIDS) Development Research News, exports recorded a -2.0 percentage points to GDP growth, because of a weak global demands brought by the effects of natural disasters in Japan, the weak import demand in China, the credit downgrade in the US and the Eurozone crisis.

A sharp drop in exports of electronic products contributed to the decline because of the disruptions in the supply chain in the semi-conductor industry.

Another reason of the GDP decline is the government under-spending, which was triggered by the contraction in public construction, which contributed 29.4 percent to the GDP.

The PIDS noted that many government projects were delayed last year as efforts to review some questionable projects were put in place with the aim of eradicating corruption.

It added that if the P165 million estimate of underspending is converted to constant prices and directly added to GDP, the growth rate in 2011 would have become 5.2 percent.

Meanwhile, the PIDS also said that while public spending will revive in 2012, downside risks for exports and international fuel prices remain.

“Overall, GDP growth is therefore expected to hit 5.6 percent in 2012,” the institution said, adding that it is still below the 7-percent to 8-percent growth target of the Philippine Development Plan.

However, PIDS noted that the government must take advantage of the more favorable economic environment to implement the required economic and political reforms. — MAYVELIN U. CARABALLO, Manila Times

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