Economy expected to grow 5.6% this year

MANILA, Philippines - The Philippine economy, as measured by gross domestic product (GDP) may grow by 5.6 percent this year, within the official forecast range of five percent to six percent for 2012, the head of a government think-tank said yesterday.

Philippine Institute for Development Studies (PIDS) president and economist Josef Yap said prospects are better this year compared to last year on the back of government’s commitment to boost public spending. PIDS is an attached agency of the National Economic and Development Authority (NEDA).

Yap said that with appropriate policies in place, 2012 could be a transition year “toward an era of higher economic growth.”

He said growth would be sustained if the government continues to boost public spending.

“GDP growth will be largely stimulated by the revival of public spending which decelerated and was a major cause of the dip last year,” he said.

The economy grew by 3.7 percent last year, significantly slower than the 7.6 percent recorded in 2010 and below the 4.5 percent to 5.5 percent target range for 2011, due mainly to the government’s under-spending.

The Aquino administration vowed to boost spending this year, with big-ticket infrastructure projects to be implemented by the Department of Public Works and Highways (DPWH) and the Department of Transportation and Communication (DOTC).

Yap said that despite the contraction in exports last year, the manufacturing sector is still expected to expand this year.

This and the service sectors are likely to drive growth in 2012, he added.

According to the latest data from the National Statistics Office (NSO), the manufacturing sector grew by 4.7 in 2011 while the service sector grew by five percent last year.

However, Yap warned the government on the downside risks from the global environment such as the financial crisis in the United States and Europe.

Rising oil and food prices could also dampen the local economy, he said.

Yap, quoting the International Monetary Fund (IMF) World Economic Outlook Report, said that global economic growth is expected to decelerate further to 3.3 percent this year.

Yap said rising fuel prices would continue to put pressure on inflation. He forecasts inflation to be higher than four percent in 2012.

On the political environment, Yap said it is important to have a successful closure of the impeachment trial of Chief Justice Renato Corona.

“Otherwise, political uncertainty may ensue and may hamper investment,” Yap said.