NEDA sees 4.2-5.2% GDP growth in ’03

The National Economic and Development Authority (NEDA) is projecting that the gross national product (GNP) will grow by 4.5 percent to 5.8 percent next year while the gross domestic product (GDP) will expand by 4.2 percent to 5.2 percent.

Projections for 2004 are even more optimistic with the GNP forecast to grow by 5.2 percent to six percent and the GDP by 4.8 percent to 5.8 percent.

This was revealed yesterday by NEDA Deputy Director-General Gilberto Llanto in a speech before participants of the 28th Philippine Business Conference of the Philippine Chamber of Commerce and Industry (PCCI).

The growth projection for next year, Llanto said, is based on expectations that the agriculture and services sector would perform well. Government, Llanto said, is optimistic that the agriculture sector would recover next year from the effects of El Niño.

This year, he said, the economy is on track to meet the whole year growth projections of four to 4.5 percent for real GDP and 4.5 percent to five percent for real GNP.

Llanto said the agriculture sector is expected to rebound in the fourth quarter as drought mitigating measures put in place by the government would temper the adverse effects of the drought on crops.

The services sector, Llanto said, shows continuing strength while industry is experiencing continued recovery for construction, utilities and mining and quarrying.

Another NEDA official has forecast that the ratio of the fiscal deficit to GDP will reach 5.7 percent this year, improving slightly to 4.7 percent next year.

"The... fiscal deficit target has been revised upwards to P202 billion from the initial projection of P142 billion," said NEDA assistant director Scholastica D. Cororaton during a presentation at a conference held by the Philippine Economic Society (PES).

"However, it is an improvement over the emerging 2002 fiscal deficit of P223 billion which is equivalent to 5.6 percent of GDP," Cororaton added.

Inflation is seen to settle at 3.2 percent this year but it is forecast to reach 4.5 to 5.5 percent in 2003.

The NEDA likewise forecast the 91-day Treasury bill (T-bill) rate to remain perched at 5.5 percent but it is expected to hit eight to nine percent next year. It likewise sees the peso closing this year at the present levels of P53 to P54 to the dollar.

The NEDA official refused to make any projections on the peso value next year.

ATR-Kim Eng Capital Partners Inc. vice president Luz L. Lorenzo said the issue is not the inflation rate or the peso value vis-a-vis the dollar.

"Inflation and the GDP is not the issue. The root of it all is the budget deficit, and that is the view of all analysts and economists," Lorenzo said. However, she admitted that there are some optimism with regards the performance of the Bureau of Internal Revenue (BIR) in the past two months.

For the month of November, the BIR surpassed its target of P37 billion by a billion pesos as newly-installed Guillermo Parayno went after thousands of tax evaders and getting some positive results.

Aside from the top negative factor of the fiscal deficit, other factors being considered as possible "daggers not drivers" for growth are the heightened political wranglings within the Arroyo administration and the increased prospects of an armed conflict between the US and Iraq.

What has worked in favor of the Philippine economy has been the absence or minimal effect of the El Niño weather phenomena.

The ATR-Kim Eng vice president said that the absence of El Niño turned out to be one driver of positive growth this year allowing both the agriculture and manufacturing sector to register some gains.

Another dagger threatening growth is a possible reversal of structural reforms.

"With the recent furor on the Maynilad privatization, the renegotiation of the independent power producers (IPPs) contracts, the controversy surrounding the Piatco deal, there is anxiety on whether structural reforms are being reversed," Lorenzo said.

"Since economic reform is a powerful agent for growth, this is a cause of concern," she added.