It had also projected GDP to grow by three percent to 3.8 percent in 2004 although much depends on how the national elections are handled, as well as the perception of the domestic and foreign investors.
Earlier, the National Government trimmed its original GDP growth forecast of 4.5 percent to five percent to a range of four percent to 4.5 percent. The Asian Development Bank (ADB) also downscaled its forecast to 3.8 percent to four percent after an earlier four percent to 4.5 percent estimate.
The revised forecast of the Ateneo de Manila University-based research center was influenced not merely by poor economic fundamentals, but rather on the heightened policial uncertainties starting from the Oakwood mutiny incident to the Jose Pidal scandal and the escape of Indonesian terror suspect Fathur Al-Ghozi.
Cielito F. Habito, ACERD director said that "political noise" is getting in the way of economic progress resulting in a slowdown in foreign and domestic investments and a higher cost of borrowing especially from foreign sources due to higher risks perceptions.
It has also resulted in slower overseas tourist arrivals, which is another major source of foreign currencies.
Meanwhile, inflation forecast was placed at between three to 3.5 percent this year after a healthier 3.2 percent registered last year.
But despite the low inflation growth figures, ACERD said it had mixed feelings with regards consumer spending. Consumer spending remains uncertain or half-hearted with election spending seen as a temporary "relief." However, the national elections may also be a major source of higher inflation rates next year.
To keep economic growth within the mid-three percentage level, the national government should be able to sustain revenue collections.
"Revenue collections remain the country‚s weakest link," Habito pointed out. The center also stressed that government should push for greater revenue authority, which is embodied in the proposed restructuring of the Bureau of Internal Revenue (BIR), and the passage of 17 economic bills.
On the political front, the analysts said that domestic and foreign business should perceive the 2004 elections as moving towards one that is generally fair, clean and peaceful. "It helps if Pres. Gloria Macapagal Arroyo makes a final announcement soon regarding her candidacy," they added.
The former economic planning secretary also said that it was imperative that the national government increase spending on education and health in the near future while sustaining its continued support to the growth of the small and medium enterprises.
"But the national government must take pains to address or close the infrastructure gap which is magnified by the preference of foreign firms in locating with the country’s neighbors. One has only to travel to see the disparity in infrastructure development between the Philippines and its neighbors like Thailand, Malaysia, Hong Kong, Indonesia and Singapore," Habito said.
The Ateneo-based analysts said the country could register the higher end of GDP growth "if the country‚s legislature stops taking on issues that should be settled in a different institution such as the judiciary." No doubt, it was referring to the Oakwood mutiny and the Jose Pidal scandal.
They added that it was the political issues that were dragging the country to the mud rather than the economic issues, which remained sound fundamentally albeit sluggish.