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RISKS to
agricultural growth, a continued weakening of
manufacturing, a decline in government consumption and
the fragile state of exports and imports top the threats
to the Philippine economy’s ability to sustain growth
this year, as serious global challenges are seen to
prevail, the congressional think tank has said in a
report.
“External and domestic downside risks such as the
weakening of the US economy, the persistent surge in
global fuel prices, rising inflation and the continuous
appreciation of the peso have constrained GDP growth
during the period,” said the report of the Congressional
Planning and Budget Department (CPBD), commenting on the
first-quarter performance of the economy.
It noted
that as a result of these constraints, “the government
has already scaled down its full-year GDP target for
2008 to [a range of] 5.7 percent to 6.5 percent.”
The
first quarter has reflected the slowdown from the impact
of these risks, with GDP growing at 5.2 percent from a
7.0-percent growth in the same period last year.
“On this
note, the CPBD would like to cite key issues and
concerns facing the Philippine economy that should be
considered by policymakers in order to sustain the
growth momentum over the long term,” said the report,
endorsed to lawmakers by CPBD director general Rodolfo
Vicerra.
The
risks to farm growth, said the report, will likely be
topped by the La Niña phenomenon, “which according to
Pagasa will last [until] June this year and would affect
the eastern section of the country.” The CPBD also noted
the high cost of farm inputs, such as crude-based
fertilizers, and the high prices agricultural
commodities.
Agriculture, fisheries and forestry, which accounted for
19.1 percent of total GDP, slid down by 3.0 percent in
the first quarter of 2008 from 4.0 percent in 2007.
“Notable
in the industry growth,” said the report, is the
“lackluster performance of the manufacturing subsector,”
which makes up 22 percent of the total GDP and “is
considered to be the main driver for
job-creation/job-generation.”
In the
first quarter of 2008, manufacturing slowed down to 2.3
percent growth, compared to 4.1 percent in the same
period last year, “due largely to the weakening of the
US market, and the high cost of production inputs such
as fuel, electricity, among others.”
The
economic stimulus provided by the May 2007 elections has
since waned, and government consumption expenditure (GCE)
contracted by 1 percent in the first quarter of 2008
from 9.5-percent expansion a year ago, said CPBD. It
also noted the 9.5-percent decline of public
construction during the period.
The
delay in the passage of the 2008 national budget may
have also hampered the government’s plan to prime the
economy through infrastructure and social development
programs, said the CPBD.
Citing
the fragile trade data, the report noted that total
exports dropped sharply by 11.1 percent in the first
quarter of 2008, from 10.8-percent increase in the same
period a year ago. Merchandise exports that have huge
local content, which could be a major source for foreign
exchange earnings, plummeted during the period, noted
the report, and citing them as: garments (down by 8.4
percent), shrimps and prawns (down by 32.4 percent), and
desiccated coconut (down by 18.4 percent).
“The
huge decline in exports is attributed to the sustained
appreciation of the peso, the weakening
US
economy—which is a major export market of the
Philippines—and
the continuous increase in the cost of production
inputs, i.e. i.e. fuel, electricity, wages, etc.”
Meanwhile, total imports plummeted by 6.6 percent in the
first quarter of 2008, after it contracted by 1.8
percent last year. The drop in exports—dominated mainly
by electronics and semiconductors with high import
content—influenced the downtrend in total imports. The
decline in imports is indicative of a weaker economic
activity in the future, particularly manufacturing, said
the report.
The
Congress think tank warned the 5.2-percent GDP growth
recorded in the first quarter of 2008 “is a
manifestation of the inherent weaknesses of the
Philippine economy. Analysts have even speculated that
the worse is not over yet and negative sentiments on the
Philippine economy may still persist until the end of
the year.”
It noted
how, despite the record high fuel prices and the
perceived slowdown of industrialized nations, “some of
our neighboring countries in Asia have actually exceeded
expectations and have grown faster than the Philippines
in the first quarter of 2008.” Thailand grew 6.0
percent, Indonesia 6.3 percent, Singapore 67 percent,
Malaysia 7.1 percent and Vietnam 7.4.
Given
these, the CPBD urged the government to sustain
structural reforms “in order to achieve a sustainable
and broad-based growth that would ultimately redound to
the improvement in the lives of Filipinos.”
Among
others, it pitched the following policy advocacies:
• The
increase from 2 percent to 5 percent of GDP of the
government’s allocation for infrastructure upgrading—i.e
paved roads, rural electrification, potable water
supply, and school buildings, among others; and the
grant of incentives for greater private-sector
participation in infrastructure development. The
oversight of infrastructure projects should be
intensified to prevent corruption in government
transactions, particularly, through the passage of the
Freedom of Access to Information Act;
• The
enactment of the Indigenous and Renewable Energy Bill to
promote the development and utilization of indigenous
alternative energy sources such as wind power, solar
energy, hydropower, geothermal and biomass, among
others;
•
Efforts to stimulate innovation, harness new
technologies, and invest in research and development in
order to fuel growth in agriculture and other local
industries. Specifically, through the passage of a
Technology Transfer Law;
• More
financial support for agricultural development coming
from the Agricultural Competitiveness Enhancement Fund (Acef),
to be channeled towards projects with high economic
returns—farm-to-market roads, irrigation, post-harvest
equipment, etc. Relatedly, the CPBD is pushing for
passage of the Farmland as Collateral Bill and enactment
of a National Land Use Policy;
•
Removal of barriers to productivity and fostering
competition in order to reduce vulnerabilities and
sustain the growth momentum;
• In the
energy sector, the proposal to amend the Electric Power
Industry Reform Act (Epira) should be geared towards the
urgent implementation of open access and retail
competition, which will empower electricity end-users to
choose where to source their power requirements;
•
Passage of a National Competition Policy to promote a
level playing field among industries and rid the country
of harmful monopolies, cartels and anti-competitive
activities. (With Fernan Marasigan,
Lourdes Fernandez) |
