Transfers-dependent economy grows 5.1%
http://www.tribune.net.ph/ The economy managed a 5.1 percent growth in the fourth quarter compared to the same period last year, mostly due to a 1.8 percent growth in consumer spending which makes up 70 percent of the gross domestic product (GDP).
Consumer spending is fed mainly by remittances from Filipinos working overseas which grew a whopping 23.3 percent to $10.85 billion last year from $8.81 billion in 2004 as more Filipinos seek opportunities abroad.
Some eight million Filipinos now work abroad representing 10 percent of the Philippine population.
Higher prices of oil and basic commodities crimped consumer spending, however, despite the fourth quarter being traditionally a period of brisk spending as people prepare for the Christmas holidays.
“Despite the upsurge in remittances of the country’s overseas Filipino workers (OFWs), the continued hike in the prices of goods and services set back consumer spending in the fourth quarter,” Romulo Virola, secretary general of the National Statistical Coordination Board (NSCB), said.
Shipments of electronics products, which make up two-thirds of total exports, have suffered from competition with China, especially after Japan’s Toshiba Corp. moved a laptop manufacturing plant from the Philippines to China in late 2004.
For the first 11 months of 2005, exports grew just 2.7 percent from a year earlier, data showed earlier this month. The government had a target of 10 percent growth for 2005, but the Central Bank has said exports may only rise by 6 percent.
The government expects GDP growth to pick up this year to 5.7 to 6.3 percent. While that December forecast was below its original goal of 6.3 to 7.3 percent.
Analysts see slower consumer spending as a key risk to growth this year, as Filipinos cope with an expected rise in the sales tax rate next month to 12 percent from 10 percent.
The sales tax hike is a key part of fiscal reforms aimed at raising chronically weak revenues and ensuring a balanced budget by 2008 at the earliest.
“For 2006, the global picture remains supportive and there is reason to hope that the Philippines can participate, especially with continued strength in remittances,” Cohen said.
The growth on quarter was less than expected in October to December coming in at 2.7 percent in the fourth quarter, below market estimates of 3.2 percent. It was still the strongest quarterly figure in eight years, government data showed.
The 5.1 percent GDP rise was also lower than the 6 percent growth in 2004.
Weak farm output and high oil prices capped growth. The agriculture sector, which employs nearly four in 10 Filipinos, “moderately expanded” by 2 percent last year due to the “tempered growth of crops, restrained growth of livestock and weak poultry growth,” Economic Planning Secretary Augusto Santos said.
All sub-sectors in industry posted “remarkable growth” except for utilities, which suffered because of reductions in government spending to achieve its fiscal deficit target, he said.
Without the effects of El Niño dry spell, GDP growth last year would have been 5.7 percent and Santos said the dry spell tempered the performance of agricultural crops.
The key services sector rose 6.3 percent, while the industrial sector managed a 5.3 percent expansion. Manufacturing rose 5.6 percent, the highest since 2001.
“The economy regained the growth momentum that got derailed during the third quarter,” Virola said.
“All major sectors contributed positively to the growth of the economy despite the persistent increases in oil and consumer prices and the political turmoil that continued to hound business and government,” he added. AFP