‘RP economy in temporary downturn but no meltdown’

The Philippine economy is in a temporary downturn but is not headed for a meltdown, Economic Planning Secretary Augusto Santos said yesterday.

Gross domestic product (GDP) growth eased to a lower than expected 4.1 percent in the three months to September due to high oil prices and anemic agricultural output, endangering the official full-year target of 5.1 percent.

The government later reported that merchandise exports had slipped 3.2 percent in October due to weak global demand for electronics, which account for nearly 70 percent of overseas shipments.

The economy is probably not at the take-off stage "but neither is it, by any stretch of imagination, on the road to meltdown," which implies sustained decline, Santos said in a statement.

For his part, Budget Secretary Romulo Neri said yesterday manufacturers and retailers should blame themselves and not the government if their sales would be down this Christmas season.

Neri said consumers have money to spend this holiday season based on the reported dramatic increase in dollar remittances from OFWs and there is no reason that these would not translate to sales for retailers and manufacturers.

He said "some creativity may be needed" by retailers to stimulate consumer demand. "You just to have to initiate a good business strategy and sell your products well to the market. That’s my advice to them."

Santos blamed the third quarter blip on drought, lower government spending as President Arroyo struggled to control the country’s growing debt, and a decline in private sector construction activity.

"The slack, however, is not permanent. The effects of the El Niño (weather pattern) should be gone in the fourth quarter, thereby boosting agriculture," he said.

Taking up the slack are record-high cash transfers of Filipinos working abroad, who he said should remit some $10.3 billion to the Philippines this year.

However, private consumption is muted, even as the overwhelmingly Roman Catholic nation approaches the Christmas holidays, the traditional peak season for the manufacturing and retail sectors.

"Families of OFWs (overseas Filipino workers) are not splurging on their remittance income. The consumption growth rate is still 4.8 percent for the third quarter, the same as in the second quarter," Santos said. "Rather, families are saving the money in banks," Santos said.

As such, "we are optimistic that the implied savings will augur well for growth in investment and consumption in 2006," he added.

Santos said foreign direct investment jumped 70.5 percent from a year earlier to $929 million in the eight months to August, with portfolio, or financial sector, investment over the past 11 months rising to around $2 billion, or five times last year’s comparative levels.

Fresh mining and construction activity next year should also help, with investment in equipment for mining and construction increasing 59 percent in the nine months to September, Santos said. — AFP, Paolo Romero