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WHILE
the Philippines remains strong in cushioning the ill
effects of high oil and food prices, the country will
not emerge scot-free from the harsh global downturn
expected this year and in 2009. “The Philippines is not
immune to a global slowdown, but neither is it hostage
to what is happening outside.”
Asian
Development Bank (ADB) Deputy Director General for
Southeast Asia Thomas Crouch added that what’s important
for the government to do right now is to ensure it can
implement policies ensuring the country is somehow
shielded from what’s happening worldwide.
Crouch
said he is holding on to President Arroyo’s word that
the government will focus its spending on the economy,
education and the environment. He also holds in high
regard her commitment to increase investments this year
and the next.
In its
latest report, the Asian Development Outlook for 2008,
the Asian Development Bank projected for the country 6
percent growth in this year and 6.2 percent next year
due to high oil and commodity prices with the global
economic downturn.
“Private
consumption will remain a major growth driver this year.
However, higher food and fuel prices will force
consumers to reduce their discretionary spending. The
rapid rise in overseas remittances, which bolstered
private consumption in 2007, is also expected to slacken
as the global economic environment softens,” ADB said in
a statement.
“At the
same time, the country’s merchandise exports are
expected to be constrained by weaker global demand,
especially for electronics goods, one of the
Philippines’ biggest export products. Higher oil and
food prices will increase import bills, as the
Philippines is one of the world’s largest rice
importers. Last year, remittances from Filipinos working
abroad soared to $14.5 billion, translating into higher
retail sales and increased housing construction,” the
bank stated.
The ADB
forecast inflation to average 4 percent in 2008 from 2.8
percent in 2007, and said the rate’s not being higher is
owing to the effective control exercised by the monetary
and fiscal policies implemented by the Bangko Sentral ng
Pilipinas and the Finance department.
It said
a key factor is improving tax collection and focusing
development on challenges such as worsening poverty.
Last year, the share of tax revenues in GDP only edged
up to 14 percent from 12.4 percent in 2004.
“This
[tax collection] momentum needs to be maintained if the
government is to sustain infrastructure spending and
keep its budget from sliding back into deficit, with the
associated pitfalls of a rising country risk premium,
higher interest rates, and weaker currency,” the report
said.
The bank
also said that despite the huge budget allocation, the
ratio of public investment to GDP still remains low at
2.8 percent. But the bank added the government is
expected to raise infrastructure investment, mainly for
transportation, power and water projects.
The bank
also projects investment in the manufacturing sector to
remain weak due to nagging problems in the domestic
investment environment and the softer external demand.
Services
sector growth is expected to dip by a little over 1
percentage point to 7.5 percent in 2008, as retailing
and finance sectors slacken. The services sector
accounted for about half of GDP in 2007. Agriculture
production is likely to revert to its normal growth rate
of about 4 percent, down from 5 percent in 2007.
The
report also saw that overall, the developing Asian
economies will register solid growth in 2008;
forecasting these economies to expand 7.6 percent this
year and 7.8 percent in 2009. The region posted its
highest growth in almost two decades in 2007 with an
average of 8.7 percent.
“Asia
will not be immune to the global slowdown, neither will
it be hostage to it. It remains tied to global activity
through traditional trade channels, and increasingly,
through its closer integration in international
financial markets,” said ADB chief economist Ifzal Ali
in a statement. Ali was in
Hong Kong for the official launch of the ADB report.
The ADB
also sees inflation rising to 5.1 percent in 2008 and
could hit a decade-long regional high. It will gradually
slide to 4.6 percent in 2009.
The bank
said price increases will be highest in Central Asia
where it will remain in double digits. Inflation is
running at an 11-year high in China, and is a threat to
other countries like
Vietnam. |
