Gross domestic product growth slows to 0.4% in 1st quarter

MANILA, Philippines – The Philippines may slip into a recession this year as economic growth – as measured by the gross domestic product (GDP) – inched up a mere 0.4 percent in the first quarter of the year compared to the same period in 2008, the National Statistical Coordination Board (NSCB) reported yesterday.

The economy shrank by a seasonally-adjusted 2.3 percent from the last three months of 2008, its lowest level recorded for the past 20 years, the NSCB also reported.

NSCB secretary general Romulo Virola said that the country’s leading economic indicators – which include money supply and investments in stocks – are on a downtrend because of the global financial turmoil.

“If this trend continues, we will have a recession,” Virola said. A recession is defined as two consecutive quarters of economic contraction.

The 0.4-percent growth is signi-ficantly below the government’s first quarter growth projection of 1.8 percent to 2.8 percent and below the adjusted 3.9 percent GDP expansion recorded in the same period last year.

GDP, the broad measure of domestic economic activity, is the sum of all goods and services produced in a country in a given period of time.

With a feeble first quarter growth, Socioeconomic Planning Secretary Ralph Recto said it is now increasingly difficult to meet the government’s revised full-year GDP growth projection of 3.1 percent to 4.1 percent range.

 “It requires harder work for us to meet the target,” Recto told reporters.

Recto said GDP should expand by 4.1 percent to 5.4 percent in the next three quarters for the full-year growth to hit the projected 3.1 percent to 4.1 percent.

However, Malacañang remained confident the economy would pick up during the second half of the year, dousing fears of the country going into a recession because of the lower than projected growth figures recorded during the first quarter of the year.

Deputy presidential spokesperson on economic matters Gary Olivar noted that the low growth rate for the first quarter referred to real GDP.

If nominal GDP were to be used, then Olivar noted that growth for the quarter would be within the range of three to four percent.

“Nonetheless we cannot be too sanguine about our prospects given that the earliest prognosis for a global recovery is still at the second half of this year,” Olivar said.

“The government will continue its stimulus plan, focusing on infrastructure spending and jobs creation as well as its safety net programs for the poor and unemployed,” he added.

Asked whether he would recommend to the Development Budget Coordination Committee (DBCC) a downward adjustment in the latest budget deficit program of P199.2 billion, Recto said it is possible.

“This will depend on our ability to borrow money. If interest cost is lower, why not? We still have to digest the data. For now, it is too early to say that the deficit (ceiling) should go up,” he said.

Finance Secretary Margarito Teves had said that there may be a downward adjustment in the budget deficit program if first quarter growth is lower than expected. The Department of Finance has so far adjusted the deficit program for 2009 for the third time because of the effects of the worldwide financial turmoil. Earlier, the government had a deficit ceiling projection of P40 billion. This was adjusted to P102 billion and then later on to P177 billion before revising this to P199.2 billion.

Finance Undersecretary Gil Beltran, for his part, said nothing is final yet in terms of deficit projections.

“We have to hear from NEDA first,” he said.

In terms of sectoral growth, the NSCB also reported that seasonally adjusted agriculture, fishery and forestry sector contracted by 1 percent in the first quarter after expanding by 0.9 percent in the last quarter due to the decline of other crops, corn and sugarcane.

Similarly, the Industry sector recorded its lowest growth in the last twenty years as it sank by 6.6 percent from a 0.1 percent growth.

“The substantial weakening of the manufacturing sector contributed immensely to the contraction of the industry,” NSCB said.

Services posted no growth for the first quarter of 2009 compared to 0.2 percent recorded in the previous quarter, as trade declined while other sub sectors slowed down, NSCB also said.

Reacting to the latest GDP figures, the non-government IBON Foundation said the 0.4 percent growth in the first quarter shows that dollar remittances from overseas Filipino workers are failing to prop up the economy.

The $1.47 billion remittances in March 2009 brings total first quarter 2009 remittances to $4.06 billion which is just a 2.7 percent increase over the $3.95-billion in the first quarter of 2008, IBON said.

“This 2.7 percent increase in the first quarter continues the trend of slowing growth in remittances in the last five years since 2005: 25.4 percent (first quarter, 2005), 14.6 percent (first quarter, 2006), 24.0 percent (first quarter, 2007), 13.2 percent (first quarter, 2008) and 2.7 percent (first quarter, 2009). This also suggests that domestic consumption and growth will be further adversely affected in the coming period by the global downturn,” IBON said.

It said that slow economic growth “underscores the urgency to put an end to government’s policies that overly rely on unsustainable sources of growth such as overseas workers’ remittances and foreign investments.” –-Iris C. Gonzales with Marvin Sy, Philippine Star