NEDA sees 2-yr growth standstill

The National Economic and Development Authority (NEDA) is expecting no growth acceleration in 2005 when the gross domestic product (GDP) is projected to grow slightly below the target rate of five percent.

Official documents showed that NEDA’s emerging estimates pointed to no change in the GDP growth rate from the 4.9 percent projected this year to another 4.9 percent next year.

NEDA said the 2005 growth rate was based on a 5.6-percent inflation rate and assumed a peso-dollar exchange rate of P56 to the dollar, incorporating the impact of the oil price hike, transport fare hike and weaker peso.

In a presentation made by NEDA director Scholastica Cororaton, she said that the country could still achieve the 5.3-percent GDP growth target for 2005 but only if government could spare the P20-billion incremental increase in capital expenditures every year.

According to Cororaton, if the government could spend an additional P20 billion every year for the next six years, economic activity could be boosted in a sustainable manner.

The government, however, has been cutting back on its spending over the last two to three years as its budget suffered under

the weight of increasing debt service costs and declining revenue collection.

Coronaton said the 2005 projections assumed no government policy intervention. However, given the external shocks expected next year, she said the 5.3 percent GDP growth originally approved by the Arroyo administration could only be achieved "with significant policy interventions."

For the rest of 2004, NEDA estimated that GDP growth could hit the projected 4.9 percent growth, mainly from agriculture, exports and services.

"Even with the oil price increases in the first quarter, second quarter growth will continue to be strong, benefiting from election-related spending," Cororaton said.

Cororaton said NEDA is expecting a six percent growth for the second quarter before normalizing over the last two quarters of the year. This includes the expected output of palay and corn.

According to the Bangko Sentral ng Pilipinas (BSP), on the other hand, higher growth rates were necessary of the government wanted to reduce poverty.

The BSP said that drastic policy intervention would become even more critical and inevitable if the government wanted to achieve its growth projections which depended on whether it would be able to spend an additional P20 billion every year. The Arroyo administration is proposing a P901-billion budget for 2005, much higher than the P865-billion budget earlier disclosed and over P40 billion more than the reenacted 2004 national budget.

However, almost half of this budget would go to debt servicing as the Arroyo administration imposed more cuts in the budget to reduce its deficit to P184 billion from P197 billion in 2004. This means however, that revenues would have to increase from the P596.4-billion target in 2004 to as much as P717 billion next year, about P121 billion more than this year’s projected revenues.