Medium-term growth seen below target

PHILIPPINE GROWTH will likely be capped at 6% over the next two to three years given the weak global economy, economists yesterday said as they urged the government to boost development via other sources.

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Expansion of 6% is “attainable” while the average 7-8% envisioned in the Aquino administration’s medium-term plan is “too high,” former Socioeconomic Planning secretary and University of the Philippines economist Felipe M. Medalla told BusinessWorld at the sidelines of the Philippine Economic Society’s (PES) 50th annual meeting.

University of Asia and the Pacific senior economist Peter Lee U, the PES president, agreed and said the Philippines could grow at an even slower 4.5-5% if the US and European economies do not improve in the medium term.

“I doubt that external factors, the US and Europe’s economies specifically, will improve over time,” Mr. U said.

“This is the reason why the government should focus on the local economy and generate growth internally. It is possible to meet the target but not now, not with the current economic situation,” he added.

Q2 RESULT REVISED

The pronouncements came as the government yesterday revised second-quarter GDP growth to 6% from 5.9%, ahead of today’s release of third quarter data. This brought first-half growth to 6.2%, up slightly from the 6.1% previously reported.

The revisions by the National Statistical Coordination Board reflected slightly higher output by the industrial sector and slightly lower output in agriculture and services. On the expenditure side, household and government consumption as well as capital formation and exports were all revised upwards.

A BusinessWorld poll of economists last week yielded a median forecast of 5.45% growth for the third quarter, which will pull down year-to-date growth to 5.9%.

Also yesterday, Moody’s Analytics said Philippine economic growth likely decelerated to 5.5% in the July-September period.

The research arm of the credit rater Moody’s Investors Service noted how the agriculture sector got hit by bad weather, although government spending, foreign direct investments, a thriving services sector and remittances by Filipinos working and living abroad continued to propel Philippine growth above its “long-run potential rate.”

OTHER SOURCES NEEDED

Mr. U said growth was essentially being driven by consumption and investment. “It is already given that we are a consumption-driven economy, so the government should lure more investors in order to get the internal growth we are looking for,” he said.

“We have recovered in terms of investment but it is not in a level where we can sustain 6-7% economic growth, plus foreign direct investment is very lackluster,” he added.

Romeo L. Bernardo, board member at the Institute for Development and Econometric Analysis, said other sectors could still help achieve the growth target.

“I think that the annual growth target is still attainable given the government’s ability to make improvements in its spending program,” he said.

“We have seen recovery in the exports sector. The BPO (business process outsourcing) industry continues to grow at 15%, the PPP (public-private partnership projects) have started to roll out and there are no political surprises or issues,” Mr. Bernardo added.

Cielito F. Habito, another former Socioeconomic Planning chief and an economist at the Ateneo de Manila University, also noted that credit rating upgrades had given “new confidence in the economy.” — D. A. N. Rodriguez, Businessworld