ADB SEES RP ECONOMY GROWING BY 5.4% THIS YEAR
MANILA, MARCH 28, 2007 (STAR) By Ted P. Torres - The Philippine economy is likely to grow 5.4 percent this year, lower than the government’s forecast of 6.1 percent, the Asian Development Bank (ADB) said yesterday, warning that modest growth is unlikely to reduce unemployment.
The country’s fiscal deficit has narrowed significantly due to a rise in the value-added tax rate, while robust remittances from millions of overseas workers, low interest rates and higher government expenditure will keep the economy on the growth track, the ADB said.
But the projected growth rate of 5.4 percent this year and 5.7 percent in 2008 “is unlikely to be strong enough to lift employment if investment remains weak,” the multinational lender said in its Asian Development Outlook report.
The economy expanded 5.4 percent last year, and this year the government is aiming for growth to average between 6.1 percent and 6.7 percent.
President Arroyo’s economic team is banking on growth to accelerate to nine percent in 2009, facilitated by a P1-trillion investment in much-needed infrastructure over the next three years.
The ADB said the Philippines should aim for an average eight-percent growth rate over the next 20 years if it is to join its Asian neighbors.
"It can be done, as it has been done by the other nations in the region," said ADB regional economist Jesus Felipe in a press briefing yesterday.
The Philippines has been recording an annual growth of between five to six percent for the past five years.
Felipe likewise urged that Philippine government to return to the "old economy", that is, giving greater emphasis on the agriculture and manufacturing sector without neglect to the services sector.
The ADB economist stressed that all developing countries marched forward in a sustainable, significant manner when the manufacturing sector took off.
The ADB said the Philippines needs to move to a higher growth trajectory and create more and higher-quality jobs for the rising number of unemployed, underemployed and those entering the labor market.
Unemployment last year stood at eight percent, with slightly more than half of the jobless high school and college graduates, the ADB said.
It also noted the number of underemployed rose to 23 percent of total employment last year, up from 18 percent in 2004.
"If reforms related to better tax collection and privatization stall, the country risk premium is likely to rise, with an adverse impact on capital inflows, the exchange rate, and interest rates, reversing some of the gains made in recent years," the report said.
Investments in infrastructure and health also need to be increased with the private sector playing a key role, the ADB report pointed out.
It noted that the main risks to these projections are a slowdown in external markets and the potential adverse impact of the national elections in May.
"The elections need to be transparent and peaceful and the fiscal and structural reforms kept on track," it said. "If reforms related to better tax collection and privatization stall, the country risk premium is likely to rise, with an adverse impact on capital inflows, the exchange rate, and interest rates, reversing some of the gains made in recent years and dimming the outlook for future growth."
Government spending is expected to increase to 17.9 percent of GDP, up from 17.3 percent last year. Outlays on public works, transport and communications, and to a lesser extent, education, are budgeted to rise 16.4 percent.
Boosted by higher public expenditure and low real interest rates, growth of investment is likely to pick up to four to six percent, up from two percent in 2006. The average annual increase in investment was just 0.4 percent from 2002 to 2006.
The services sector will remain the major growth contributor on the supply side, expanding by 6.3 percent in 2007. Agricultural production is likely to grow by 3.9 percent.
However, an anticipated slowdown in the global electronics market will dampen manufacturing, holding industrial growth to 4.8 percent. Inflation, meanwhile, is likely to remain within the target range of four to five percent. — with AP
Chief News Editor: Sol Jose Vanzi
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