The government had targeted five-percent export growth for 2003 and is aiming for 10-percent export growth this year.
Electronics, which accounted for 66.65 percent of exports last year, suffered a 2.62- percent fall while some sectors such as control instrumentation, telecommunications equipment and radar equipment posted double-digit declines.
Arthur Young, vice-president of the trade group Semiconductors and Electronics Industries Industries in the Philippines (SEIPI), conceded that 2003 had been "a very challenging year," blaming global developments such as the outbreak of Severe Acute Respiratory Syndrome (SARS).
At the same time, the industry had suffered from a lack of new foreign investment with many businessmen preferring to go to China.
Young said he is optimistic that the electronics industry will bounce back this year with signs of a growing world demand for semiconductors, the backbone of the local electronics sector.
"The industry is very bullish about 2004. The global demand is recovering and we are looking at somewhere between 10 and 30 percent growth in terms of exports for semiconductors," Young.
Exports rebounded in December, rising nine percent from a year earlier, raising hopes the economy is starting to benefit from a global pick-up in demand.
The NSO said that export earnings rose to $3.176 billion in the last month of 2003 from $2.914 billion in December 2002. Key electronics exports rose 6.9 percent year-on-year.
"At least it’s consistent with data reported in other countries of export growth of between 10 and 15 percent," G.K. Goh Securities regional economist Song Seng Wun.
"This is at the lower end of the forecast that we have, but at least it’s more consistent.
However the Philippines still lags the region, with Malaysia’s exports surging 35.7 percent in December from a year earlier while Singapore’s non-oil exports for that month were up 30.7 percent from a year earlier. Thailand and South Korea also reported growth of more than 30 percent.
The statistics office revised up its exports figure for November, which originally showed a sharp 4.9 percent year-on-year fall, to a 0.6 percent drop.
Confusion over November exports after the government ordered a review of the number had stirred doubts about the reliability of Philippine economic data.
Sluggish growth in exports has raised concern that the economy, already handicapped by politics ahead of May 10 elections, is slipping behind its neighbors and losing out to Chinese competition.
While the economic march of China has boosted Philippine trade with its giant Asian neighbor, economists have questioned whether the country’s export make-up is sophisticated enough to weather strong competition from Chinese products.
Analysts and business executives said a government projection of 10 percent export growth for 2004 was achievable given the current recovery in the global electronics industry. About 65 percent of Philippine exports are electronics.
"Given the current state of global electronics demand, we would probably see the momentum of 10 percent export growth being sustained in the first half of 2004, especially as on the year-on-year basis, the base last year was fairly undemanding," said Song of G.K. Goh.
Analyst Cecilia Tanchoco at Bank of the Philippine Islands said the electronics industry could not fully exploit the weaker peso because it relied heavily on import materials, the cost of which rises as the pesos weakens.
"The industry provides very little value-added as it does a lot of sub-contracting works for other countries," she said.
After brushing with recession early last year, the economy has entered a mild recovery driven mainly by healthy agriculture growth and consumer spending. It posted GDP growth of 4.5 percent in 2003 and the government is forecasting growth of up to 5.8 percent in 2004.