Economy may have grown by 3.9% in Q1 - Diokno

MANILA, Philippines - The Philippine economy may have grown by just 3.9 percent in the first quarter of the year on the back of slower growth in dollar remittances from overseas Filipinos, an economist said yesterday.

Former budget and management Secretary Benjamin Diokno does not believe the economy grew by 5.2 percent from January to March as President Aquino has said.

Diokno, former budget and management secretary said public spending remains slow despite the improvement from last year.

“I see Philippine economy growing 3.9 percent in the first quarter of 2012 owing to slow government spending, slower exports and weak agricultural output,” Diokno said in an interview.

State spending improved in the first quarter of the year but remains below program. The government disbursed P296.397 billion in the first quarter, higher than the P258.555 billion disbursed a year ago but still below the program of P440.588 billion for the period.

Diokno said the slower than expected remittance growth in March – the slowest growth posted since March 2011 – would also affect economic growth.

“A big part of foreign exchange remittances is used for consumption,” he said.

Money sent home by the roughly 8.5 million Filipinos working abroad reached $1.7 billion in March, a five percent growth from the same month last year, the slowest growth posted since March 2011, latest data from the Bangko Sentral ng Pilipinas (BSP) showed.

Diokno said part of the remittances is used to invest in consumer durables, transport and investments in house and lot.

The economic crisis in the eurozone and in the US has dampened dollar remittances and would likely lead to a slower consumption spending.

“Given the uncertainty brought about by the slower, gloomier global economy, some families might have changed their consumer preference and behavior. Unsure of the future, some may decide to save rather than spend. Some may not be willing to commit to long-term investment such as purchase of house and lot. Both will cause the economy to slow,” Diokno said.

However, former Socioeconomic Planning Secretary Cayetano Paderanga Jr. said first quarter growth may still hit 5.2 percent as President Aquino said.

Paderanga, who resigned last week, said that while remittance growth slowed down in the first quarter, there’s no cause for alarm yet.

He said if the trend continues for at least three months that’s the time to worry about slowing growth in dollar remittances.

Last year, the Philippine economy, as measured by gross domestic product (GDP), grew by 3.7 percent which was way below the official forecast range of 4.5 percent to 5.5 percent for 2011 and less than half of the 2010 growth of 7.6 percent.

The Aquino administration’s under-spending has been blamed for the lackluster economic growth.

For 2012, the government is projecting the economy to grow by five percent to six percent.