NEDA Director General Felipe Medalla said the performance of the economy during the second quarter would be critical to the overall whole-year performance, especially since the country would be facing national elections in May.
Medalla made this statement as the business sector awaits an announcement from newly installed President Gloria Macapagal-Arroyo about the reconstitution of the government’s economic team. Only the finance secretary has so far been appointed in the person of former Senator Alberto Romulo.
In the meantime, Medalla said the economy would still have some serious catching-up to do after the resolution of the crisis. However, he expressed optimism that the crisis was resolved early enough in order to avoid a recession although the economy sustained too many injuries to avoid a slowdown.
According to Medalla, the economy had sustained enough momentum, from 2000 to ensure that it would not plunge into recession this year, more so now that the political crisis has been resolved.
"If I have to bet my money, I would bet against the possibility of an economic recession," Medalla said. "Having said that, we should expect some slowdown in the first quarter."
The official figures for the 2000 GNP and GDP will not be out until Jan. 27, 2001, but Medalla said there were early indications that the economy’s performance during the final quarter of 2000 was even slower than the third quarter.
"The only reason we expect to meet the 3.8-percent growth projection is because the agriculture sector performed magnificently well in the third quarter of 2000 and on a whole year basis, growth is already 3.4 percent for this sector," he said.
The effects of the growth in agricultural production is all-encompassing: because there is enough food supply, food prices have resisted pressures to go up, which in turn managed to keep inflation rates down despite the depreciation of the peso and the increases in the price of oil products.
The stability of food supply and inflation rates also allowed economic managers a little more leeway in managing interest rates.
Medalla said growth for the first quarter of 2001 would be slower compared to the fourth quarter of 2000.
Since the political unrest lasted less than a month into 2001, Medalla said economists could be a little more optimistic. Even the effects of the plunging peso, Medalla said, would be short-lived as soon as people stopped speculating on the currency in anticipation of worse things to come.
"I am actually more worried about interest rates because they have a longer lasting impact," he said.