ADB: No recession for RP this year
By Karen Flores, abs-cbnNEWS.com | 07/09/2009 5:44 PM
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MANILA - The Asian Development Bank (ADB) said Thursday that the Philippines is not going to experience economic recession this year because of the continuing growth in remittances and improving business confidence.
The Manila-based multilateral lender is set to revise its previous 2.5% growth estimate for the country but said the local economy will still post a growth, though minimal, this year. They did not provide figures.
"The Philippines can maintain positive growth in 2009," ADB Country Director Neeraj Jain told reporters in a press briefing at the ADB headquarters. He said the country's "continuing remittance growth" and "turnaround in key exports" send positive signals of growth for 2009, contrary to other economists' views that weak remittances and exports will drag the economy this year.
The ADB is set to announce its revised set of growth projections next month.
In March, the ADB said the economy is likely to expand by 2.5% this year due to weakened global demand for the country's goods and services. At that time, the multilateral lender's projection is lower than the government's estimate of at least 3.7% of gross domestic product (GDP) growth.
Last month, however, the government has downscaled its growth forecast to a range of 0.8 to 1.8% following the economy's dismal 0.4% GDP growth for the first three months.
Given this, Jain said the ADB is expected to lower its projections for the economy, which he said will likely stay positive.
Other international institutions have had nothing but bleak forecasts for the Philippines' economic output this year, led by a -1% contraction from the International Monetary Fund from its previous flat growth estimate.
The World Bank has also downscaled its growth forecast for the country this year at -0.5% from 1.9%, while London-based Fitch Ratings also cut its GDP growth projection to 0.1% from 0.5%.
Remittances, exports
Remittances in the past months have still been growing, but the pace of growth has slowed to less than 5% for the past months, compared to double-digit increases in the previous years. Despite this, Jain said any growth in remittances, no matter how small, is still a good thing.
"Remittance growth may have gone down to less than 3% [in April], but it's still good," he said.
On the other hand, merchandise exports have been plunging at a range of 30% to 40% for the past 7 months. Shipments of electronic products, the country's main export, plunged 33.2% to $1.69 billion in April from $2.51 billion recorded in the same month last year.
However, Jain pointed out that the country's electronics exports have been showing signs of recovery when compared month-on-month. "Exports of electronics are now growing month-on-month, but it's still declining year-on-year," he said.
For instance, shipments of electronic products showed month-on-month growths since the start of the year at 0.8% in January, 0.5% in February, 19.9% in March, and 3.9% in April. In December and November last year, electronics exports showed month-on-month declines of 33.6% and 13.9%, respectively.
Tax collection
Despite the positive outlook, Jain warned that the Philippines is likely to suffer from the slump in government revenues this year as a result of the economic crisis.
"Lower government revenues means there is less fiscal room available," he said.
The country's tax effort has slowed to 11% of GDP for the first 3 months of 2009 from 12.9% recorded in the same period last year. Tax effort, or the ratio of tax collections to GDP, mirrors the government's ability to raise revenues for infrastructure and social services.
Tax collections fell by 7.9% to P200.74 billion, P18.34 billion short of the government's target of P219.08 billion for the three-month period. The country's GDP, on the other hand, barely expanded in the first quarter at 0.4% from 2.9% in the same period last year.
Given this, Jain urged the government to improve its tax collection measures through excise tax reforms, rationalization of fiscal incentives, and simplification of net income taxation for individuals in businesses.
"Medium-term fiscal stabilization should be anchored on raising tax effort, not reducing public spending," he said.
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