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SOMEBODY
asked me that with the global economy bottomed out, how
could I see recovery in light of the easing of oil and
commodity prices?
I
responded that it is too early to say that the global
economy is improving. Just look at the subprime problem
in the United States, which triggered the worldwide
credit crunch. Recent reports say that losses from the
subprime problem have reached $500 billion, and there
are speculations that the amount could rise up to $1
trillion.
That
would have serious impact throughout the world,
including the Philippines, because of the domino effect
since our banks don’t have substantial exposure in the
US subprime market.
Another
question—posed to me several weeks before the National
Economic and Development Authority (Neda) released its
report on the economy for the second quarter and first
half of 2008—was: Do you think the economy is worsening,
given the downscaling of growth projections by the
government and by private analysts?
I
responded: To me, anything above 5 percent is OK,
considering the global crises.
And I
was not surprised at all when the Neda figures came out:
Gross domestic product (GDP) grew by only 4.6 percent in
the second quarter of 2008, down from 8.3 percent in the
same period last year; and by 4.6 percent in the first
semester, down from 7.6 percent last year.
You
know, it is easy to say—and this is true—that economic
growth in the Philippines, as well as in its neighbors,
was dragged down by high inflation and slower growth in
developed economies, which are the major markets for our
exports.
And it
is also tempting to indulge in despair and comfort us in
the thought that other countries did not do well, too.
Southeast Asian powerhouse Singapore slowed down to
2.1-percent GDP growth in the second quarter of 2008
from 9.1 percent in the same period last year. Hong Kong
grew by 4.2 percent, down from 6.2 percent. And we’re
not so different from South Korea, which grew by 4.8
percent. Of course, Thailand and Indonesia did much
better than us: 5.3 percent and 6.4 percent,
respectively.
For
businessmen, looking at factors beyond their control and
finding comfort in the thought that everybody is in bad
shape, it is a fatalistic and fatal response to the
slowdown in the economy.
I don’t
waste my time in self-pity or despair. I look at the
root of the problem and seek not only the solution or
proper response, but also the opportunity behind the
problem. And I focus on the strengths behind the
weaknesses.
Now, let
us look at the numbers released by Neda. During the
second quarter, the industry sector grew by 4.8 percent,
down from 10.3 percent in the second quarter of 2007.
Services grew by 4.3 percent, down from 8.4 percent. But
the agriculture, fisheries and forestry sectors,
remarkably, improved to 4.9 percent, compared with 4.2
percent last year.
Within
the industry sector, the manufacturing sector posted an
impressive performance with 6.1 percent growth in the
second quarter (up from 3.4 percent) and 4.3 percent in
the first semester (up from 3.7 percent).
The
mining and quarrying subsector was the worst performer,
posting negative 18.5 percent, a reversal from the
38.9-percent growth in the second quarter of 2007, and
negative 5.3 percent for the first half from 28 percent
growth last year.
Neda
traced the decline to the decrease in exports to China,
which reduced industrial activities in preparation for
the Olympics. That means we can expect some improvement
in the third and fourth quarters, hopefully, enough to
cover the shortfall in the first two quarters.
Construction was also down. The reason: the negative
growth of public construction—6.4 percent in the second
quarter (from 59.4 percent growth in 2007) and negative
8.5 percent in the first half (from 43.4 percent last
year, an election year).
However,
private construction surged by 25 percent in the second
quarter (up from 13.7 percent) and 14 percent in the
first half (compared to 17.3 percent last year). The
strong growth reflected the performance of the
real-estate industry with gross revenues of 23.5 percent
in the second quarter, second only to trade that posted
a 24.1- percent growth in revenues.
Ownership of dwellings and real estate was the only
subsector of the services sector that posted positive
growth: 7.3 percent for the second quarter (up from 6
percent), as well as for the first half (up from 5.8
percent).
The big
boost comes from remittances from overseas Filipinos who
sent home $5.52 billion in the first semester, up 37.2
percent from $4.02 billion. Deployment of workers abroad
grew by 33.9 percent to 354,735 from 264,942.
Agriculture, forestry, livestock and other crops posted
negative growth rates. Coconut and sugar cane rebounded
from negative to positive. Sugar cane, in particular,
grew by 110.8 percent in the second quarter and 25
percent in the first semester, from negative 23.8
percent and negative 6.5 percent, respectively.
Corn
grew by 24 percent in the second quarter, rebounding
from negative 3.8 percent last year; it grew by 19.6
percent in the first half, compared to 5.7 percent a
year ago.
I see
something positive even in the obviously negative
numbers. For instance, personal consumption expenditure
was down to 3.4 percent in the second quarter and to 4.3
percent in the first half, from 5.6 percent and 5.7
percent, respectively, last year.
The
slowdown was the natural reaction to the high prices,
which drove up the inflation rate in the first six
months, when oil prices reached $140 a barrel compared
with $100 in December 2007.
The
slowdown in consumption will help stabilize prices,
encourage savings and should lead to lower inflation,
which the Bangko Sentral ng Pilipinas considers and
economists see as a major threat to long-term growth.
Behind
the disappointing numbers (compared with 2007, which was
a 31-year high in terms of GDP growth), we see a lot of
strengths in the Philippine economy, which should help
us sustain growth for the remainder of the year. As I
have said, anything beyond 5 percent is OK, considering
the crisis situation.
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