NEDA confident RP economy will grow 5.3% this yr

The National Economic and Development Authority (NEDA) is confident that the Philippine economy will grow by 5.3 percent this year despite forecasts of continued increases in the world crude prices. For the next year, the NEDA forecast is for a 6.3- percent growth.

At the start of 2005, the target was set at a broad range of 5.7 to 6.7 percent before the world oil prices consistently broke all price ceilings. The growth targets was trimmed to 5.3 percent after the first semester.

Despite the current economic problems, the NEDA remains firm that the country is on track for a growth of 5.3 percent in its gross domestic product (GDP) based on the assumption that Dubai crude price will average $50.77 per barrel for the entire year.

The average cost of Dubai crude in September was $56.54 per barrel. By Oct. 11, the price was down to $53.85.

The Department of Energy (DOE) however forecasts continued strong demand for oil due to winter reserves buying and the high demand from the expanding economy of China. The price is projected to reach $60.02 per barrel by yearend.

"The average oil price forecast is $50.61 per barrel for the whole of 2005 which is still lower than the $50.77 used to forecast the 5.3-percent growth target," Dennis Arroyo, NEDA head for the national planning and policy staff, said. "We are still ontrack, the average is still lower than the original computations."

In 2004, the share of personal consumer spending to total gross domestic product (GDP) stood at 69.04 percent, and is expected to remain in the same level this year.

"High oil prices lead to inflation which in turn slows down household consumption therefore lowering GDP," Arroyo said. "The counterforce to high oil prices is the high remittances inflows."

The conservative estimates for remittance inflow this year is $9.4 billion, although the Bangko Sentral ng Pilipinas (BSP) estimates the real figure at over $10 billion. If it will grow as aggressively as last year which was around 22 percent, remittances could reach $15 billion.

The NEDA official said demand for OFWs will continue to expand due to the aging population of Europe, Japan and the United States.

The Philippines is a major supplier of caregivers, nurses and domestics. In terms of remittances, it is only third behind Mexico and India. "Policy-wise, we can export caregivers, nurses and doctors, but domestically, it is a serious problem."