Constituent assembly to push RP into recession

MANILA, Philippines – Administration congressmen’s push for Charter change through a constituent assembly (Con-ass) would worsen the economy and hasten the country’s fall into recession, GlobalSource, a New York-based think-tank, warned in a report.

GlobalSource said that barring developments such as a change in the Charter, the economy could still grow at around 0.8 percent to 1.2 percent this year even as analysts already warned of a looming recession in the country as a result of the global financial turmoil. 

“However, we have to add a caveat for the possibility of the continued push for Charter change resuscitating our perfect storm scenario such as stress in the economy by volatile political conditions,” GlobalSource said in its report.

GlobalSource, in a report authored by former Finance Undersecretary Romeo Bernardo and economist Margarita Gonzales, said that if Charter change pushes through, “economic growth may slip to negative levels.”

The think-tank echoed the warnings already sounded by Socioeconomic Planning Secretary Ralph Recto and Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr. that the push for Charter change could weaken the economy.

The House of Representatives last week passed House Resolution 1109 seeking to convene a constitutional assembly to amend the Charter.

 In the first quarter of the year, the economy grew by just 0.4 percent, slower than the government’s growth forecast of 1.8 percent to 2.8 percent for the period.

The economy actually shrank by a seasonally adjusted 2.3 percent from the last three months of 2008, its lowest level recorded for the past 20 years, the NSCB reported.

GlobalSource said the government’s fiscal stimulus program of P330 billion hardly supported economic growth.

“There has been an apparent failure to pump-prime the economy judging from insignificant increases in government consumption on the spending side of national accounts estimation  (3.8 percent), an absence of improvement in government services on the production side (zero percent) as well as a decline in public construction (-4.4 percent),” GlobalSource said.

National Statistical Coordination Board (NSCB) secretary-general Romulo Virola has said that the economy is already teetering into a recession.

This, the New-York research firm said, may be averted if the government’s fiscal stimulus package takes effect in the remaining part of the year and if administration allies stop the push for charter change.

GlobalSource said the economy could get a boost from consumer spending. 

“While first quarter numbers portray an economy deteriorating as fast as it did in the mid-1980s,  the decline is not as palpable today because of improved disposable incomes, with  household saving more of a precautionary, inter-temporal choice. The downside for the  economy however is if the mood of both consumers and firms gets dampened by the  surprise GDP results , spurring further cuts in spending and investment,” GlobalSource said.