Government downscales growth target

The Philippines faces slower growth this year with economic managers further scaling down the gross domestic product (GDP) target for the year to a range of 3.3 percent to 3.8 percent, lower than the original target range of 3.8 percent to 4.3 percent.

The new GDP target was decided over the weekend by the inter-agency Development Budget and Coordination Council (DBCC). GDP refers to the total amount of goods and services produced in the Philippines for a given period, excluding the remittances of overseas Filipino workers.

The GDP target was the only figure changed by the DBCC as it opted to stick to its original macro-economic targets such as the gross national product which was unchanged at four to 4.5 percent.

The export target also stays at four percent while collection targets of the Bureau of Internal Revenue and the Bureau of Customs remained at P408 billion and P120 billion.

A finance official said that despite setting a lower GDP target, the DBCC is still confident it will be able to contain the budget deficit, projected at P145 billion for this year.

The GDP was originally targeted to grow 4.2 percent this year but was downscaled to 3.8 percent in March, following the slowdown in exports which is the main driver of growth in addition to foreign investments.

The DBCC was prompted to revise the GDP target because of the slowdown in the economies of the country’s biggest trading partners, the US and Japan.

For the first four months of the year, export revenues fell 4.1 percent of $10.810 billion from $11.275 billion in 2000. Electronics exports, which account for 48 percent of total exports, dropped 28 percent to $1.088 billion last April.

Japan, also one of the major markets for goods produced in the Philippines, also had to cut down on its imports as its own major industries and services sectors are saddled with debt compounded with weak consumer demand.

Despite this, the DOF official explained that there is still a good chance of meeting the higher range of the new GDP target or 3.8 percent.

"Recent figures show that the so-called slowdown in the US has bottomed out, and it is in fact, headed for a pick up in the third quarter," the official said.

The country’s economic manager are also optimistic that with the anticipated uptick in the economies of the US and Japan, export demand will also begin to recover, especially towards the Christmas season which is when exports traditionally pick up.

Another reason for government’s optimism is that the expected harsh effects of the El Niño phenomenon will not be in the magnitude as originally projected.

The El Niño or dry weather phenomenon, was earlier seen to hand a severe blow to the agriculture sector which accounts for about 24 percent of GDP.

"We expect the backlash from El Niño phenomenon to be less harsh than what was originally expected," the finance official said.

The new GDP target will be presented to the Arroyo Cabinet for approval.

The slower growth rate is consistent with the 3.3 percent GDP projected earlier this year by the International Monetary Fund (IMF).

The IMF said the lower GDP projection was a result of weak consumer spending and private sector investment despite the return of investors confidence. – Rocel Felix