Asia Times: Analysis: Philippines braces for slowdown


	June 16, 2001	atimes.com

Southeast Asia

Analysis: Philippines braces for slowdown

MANILA - The Philippines is bracing for another difficult period of adjustments in the regional markets as volatility on both the domestic and internationals fronts appeared to have slowly eroded the hard-earned gains it attained in the first few months of the new administration. These have developed even as the national government has intensified its efforts to introduce reforms necessary to further improve the economy in the short-term.

Already the economic team has revised its growth target for the year, owing to the inevitable happenings that cropped up and which once again put the Philippines in the international limelight. However, regional analysts have concluded that the domestic economy is expected to eventually reap the fruits of the economic programs put in place even as the government is faced with an uphill battle to regain anew the confidence of foreign investors.

For instance, the Economist Intelligence Unit (EIU) has predicted that the economy is likely to struggle hard in meeting its growth target for the year, owing to the onset of negative developments around the region, not to mention the prevailing internal problems that the concerned authorities are addressing right now.

The EIU has pointed to recent negative developments as the major reasons why the 3.8 percent gross domestic product (GDP) growth target was revised to only 2.3 percent, a figure that is almost within the acceptable target set by the government's economic managers. On the contrary, local economists have assured the public that a slight change in domestic inflation rate would not pose a big threat to the economic stability of the country as it will only hover between 6 to 7 percent. As such, this will not have so much impact on the prevailing prices of the local commodities, except that of oil products which are seen to threaten the likelihood of a fare hike.

Despite the United Nations nod to allow Iraq to sell some of its oil stocks to the world market for humanitarian reasons, oil prices have started to pick up thus again putting consumers in a restless mood. Another development that is now causing a serious worry to the economic managers is the impending recession in the Japanese economy, a major trading parter in the region, and a reliable source of foreign exchange earnings for its neighboring economies like the Philippines.

In its latest economic forecast, the Department of Finance (DOF) has said that GDP growth for the first quarter of the year was 2.5 percent against a growth target of between 3.3 to 3.8 percent. The GDP figure was a correction from the 3.8 percent to 4.3 percent target that the national government originally set. The country has attained a gross national product (GNP) growth of 3.6 percent in the same period.

Last year, GDP grew by 3.9 percent which was contributed by the higher growth in industry and services sectors, thus compensating for a slowdown in agriculture. The DOF said that consumption rose marginally during that period. But it said that exports of transport equipment, electronics and garments, have continued to perform well, increasing by more than 8 percent last year.

Against this backdrop, the country's gross international reserve of US$15 billion is enough to sustain 4.5 months of merchandise imports.

At the same time, economists have expressed fears that the local currency rate is expected to hit the new growth adjustments, owing to the latest rounds of oil price hikes in the world market.

(Asia Pulse)

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