Government trims 2003 export growth projection

The government has scaled down its export growth projections for 2003, saying that the unresolved conflict between the US and Iraq would dampen growth from the original 10 percent to only eight percent.

Simulations made by the Bangko Sentral ng Pilipinas (BSP) indicated that if the Middle East situation worsened next year, exports would fall to eight percent while import growth would decelerate from 11 percent to only 10 percent.

According to BSP Deputy Governor Amando Tetangco Jr., this was the worst case scenario where the conflict would escalate into an actual shooting war between the US and Iraq.

According to Tetengco, the country’s exports were packing enough momentum that the deceleration even in the worst case scenario would not be big enough to actually stymie next year’s export growth.

The BSP’s original estimate placed the 2003 export growth initially at six percent and this was revised upwards to 10 percent as exports of electronic products picked up strength on the back of the cyclical growth in consumer demand for electronics.

The export scenario for 2003 would mean that the BSP also has to revise its balance of payment projections originally pegged to reach a $200-million surplus on the back of the rebounding export sector and strong dollar remittances from overseas contract workers.

This year, the BOP surplus was expected to hit $150 million, completely reversing the $192-million deficit recorded in 2001. Next year, estimates were roughly equal to this year’s BOP surplus but Tetangco said this could go up to as high as $200 million depending on the performance of the export sector.

Tetangco said the government’s debt service expenses would not surge again until 2004 when it is expected to retire maturing obligations amounting to $500 million.

The BSP said the upturn in exports this year was due to sustained increase in the export of machinery and transport equipment, processed food, beverages and sugar.

Specifically, the BSP said electronics export continued to rebound, growing by 23.1 percent in May.

As a result, the January to May electronics exports grew by 2.2 percent and reversed last year’s contraction.

The BSP said there was increased demand from Asian markets particularly Taiwan, China, Korea, Malaysia and Hongkong. These market, the BSP said, compensated for the lwoer demand from the US and Japan, the country’s traditional export destinations.

Imports were also on an upswing, reflecting the replenishment and inventory build-up as manufacturers geared up in anticipation of more robust domestic demand.

The BSP report also indicated that OFW remittances continued to be the main factor behind the health of the country’s current accounts and ultimately, the balance of payments.

For the whole of 2002, remittances are expected to reach a record $8 billion compared to only $6.2 billion last year.

According to the BSP, the significant increase in remittances was due to the corresponding 4.1 percent increase in the number of workers deployed abroad msotly to Europe, Africa and the Americas.

Although Filipino workers have traditionally been streaming into the booming economies in the Middle East, more and more workers were finding employment opportunities in other parts of the world, particularly Africa and Europe.

Labor has been the country’s most important and single most profitable export since the 1970s, accounting for a whole percentage point of the gross national product.