(UPDATE) Gov't lowers 2009 growth targets to 0.8—1.8%
By Lala Rimando and Karen Flores, Newsbreak and abs-cbnNEWS.com | 06/10/2009 7:08 PM
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MANILA - After rebuffing multilateral and international rating agencies for announcing economic targets drastically lower than the Philippine government's, the country's economic managers announced late Wednesday that growth forecast for 2009 has been downscaled to a range of 0.8 percent and 1.8 percent.
The Development Budget Coordination Committee (DBCC), the interagency body that sets the government's macroeconomic targets, previously projected a growth range of 3.1 to 4.1 percent for the gross domestic product (GDP) this year.
That growth targets for the year will be lower than expected was not a surprise, especially after the dismal 0.4-percent GDP growth for the first three months.
What analysts and economists had been watching out for was how low the revised goals will be.
Downhill
Government statistician Romulo Virola of the National Statistics Coordination Board hinted that the Philippines is "on the brink of recession" weeks ago, prompting doubts even among some members of the economic team if the P330 billion economic stimulus package, which was supposed to cushion the country from the impact of the global financial storm, actually worked.
Officials of the Bangko Sentral ng Pilipinas had been particularly vocal about this since monetary tools—
from interest rate cuts to special depository accounts—have greased the financial system to spare it from credit freezes that hit some rich countries.
Meanwhile, other key economic indicators—remittance flows, exports, foreign direct investments, among others—showed that the global economic slowdown continued to batter our economy. Exports, which account for 40 percent of local economy and a major employer, had been plunging at a range of 30 to 40 percent for the past 7 consequtive months. Foreign investments have continued to dwindle as well.
Yet, Socioeconomic Planning Secretary Ralph Recto continued to stress the positive. He said the Philippines, unlike its neighbors in Asia and other developing countries elsewhere, is still posting a positive, even if much reduced, growth rate.
"We remain confident that the Philippine economy will maintain a positive growth this year," he said in a statement released Wednesday.
The government has also revised its gross national product (GNP) growth to 2.1 to 3.1 percent.
Impact
According to Finance Secretary Margarito Teves, the revised growth target will result in a budget deficit of P250 billion or 3.2 percent of GDP, much higher than the previous target of P199.2 billion or 2.5 percent of GDP.
“Despite the adverse impact of the lower growth on our revenue collection, we are keeping our level of spending to help us sustain modest economic growth,” he said.
The new budget deficit goal, the highest on record in absolute terms based on available government data since 1993, would require an increase of P52 billion in this year's borrowing plan, officials said.
International institutions have had nothing but bleak forecasts for the Philippines' economic output this year. On Wednesday, the International Monetary Fund announced its latest projection: a -1 percent contraction instead of its already pessimistic flat growth estimate months back.
London-based Fitch Ratings has also cut its economic growth forecast for the country to only 0.1 percent from 0.5 percent, while the World Bank has projected a dismal growth this year at 1.9 percent. The Asian Development Bank, meanwhile, had a more optimistic outlook for the Philippines with a GDP growth of 2.5 percent.
2001 to 2009
The high end of the revised GDP growth for 2009 (1.8 percent) puts the country on the same growth rate as when President Arroyo assumed office in 2001.
At the time, the country was still reeling from the aftershocks of the 1997 Asian financial crisis. This time, the country is in the middle of another crisis—a global one.
The global economic crisis comes on the heels of the 2010 national elections, which may or may not push through given the recent initiatives of President Arroyo's allies in the Lower House to change the Constitution. While the initiative is supposed to remove economic gridlocks in the Charter, critics said this Charter change move is aimed at allowing President Arroyo to stay in office beyond 2010, the end of her term.
How the Philippine economy will continue to navigate the global economic crisis and endure the local political concerns in 2009 is likely to contribute to public's sentiments about the country's leaders.— with Reuters
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