RISING OIL PRICES COULD PUSH RP INTO RECESSION - NEDA
MANILA, August 11 , 2004 (STAR) By Des Ferriols - The National Economic and Development Authority (NEDA) said yesterday the unabated increase in global oil prices could have recessionary effects on the economy over the long term.
The NEDA said there were indications of "good numbers" for the first semester economic performance but top officials said sustainability was becoming an issue especially in the light of developments in the world market.
The Philippine economy has been slowing down in the last six years but the growth had continued despite external and internal shocks, narrowly missing recession only by the strength of dollar remittances from overseas Filipino workers (OFWs).
NEDA Director General Romulo Neri told reporters yesterday that the increase in oil demand from China and India would continue to exert pressure on world oil prices regardless of the developments in the Middle East.
Because of this pressure, Neri said oil prices would continue to stay up and this would have a long-term adverse impact on the Philippine economy, particularly on growth and the fiscal situation.
As of the first quarter of the year, the country still managed to post a 6.4 percent growth in gross domestic product (GDP) due mostly to the record performance of the agriculture sector and services.
By convention, the NEDA would consider the country to be considered in recession after two successive quarters of economic decline or negative GDP growth.
According to Neri, however, there were counter-measures that could be undertaken in order to mitigate the impact of these negative factors and sustain the economic growth projection.
"We are reviewing all our assumptions now but that only means that weíll have to re-tool and take counter-measures," Neri said.
Neri said that since oil prices are not likely to return to their former levels, some recessionary effects are expected over the next few years if the government did not take these counter-measures.
"Itís important to anticipate," Neri said. "Thatís the only way we can plan ahead and take steps ahead of an impending situation."
Neri said the NEDA was doing simulations to be able to anticipate the extent of the economic impact of a prolonged oil crisis.
"Our biggest challenge is the power sector, we have to find some alternatives to oil and reduce our dependence on it even more," he said.
According to Neri, the NEDA had determined that there was still room for more aggressive development of the countryís geothermal and natural gas resources as alternative to bunker fuel.
"It will require massive investments on the part of the government and the private sector, we have to make it happen," Neri said. "We are preparing for tight oil supply in the coming years especially for public utilities."
Reported by: Sol Jose Vanzi
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