The lower export growth forecast was made by the inter-agency Development Budget and Coordinating Council (DBCC) following a steady drop in dollar earnings, particularly from electronics which account for close to 50 percent of total exports.
The growth in exports is critical because of revenues from this sector which is one of the main engines of growth in addition to foreign investments.
Local exporters were not surprised at the lower export growth forecast, saying that they even expect a one-percent drop in total earnings due mainly to the sluggish performance of the electronics sector.
The Semiconductors and Electronics Industries of the Philippines (SEIPI) earlier downgraded its electronic export outlook. SEIPI forecast zero growth for electronic shipments due to falling prices and waning global demand.
At the start of the year, government projected exports to grow by eight percent, but this was revised and cut in half to four percent after the US and Japan showed signs of economic weakness.
Foreign investment bank ING Barings trimmed its US economic growth forecast to 1.6 percent from two percent for the whole of 2001, while Japan’s growth has been slashed to one percent from 2.6 percent earlier. This would result in a slower global growth of three percent compared to an earlier forecast of 3.6 percent.
The country’s export earnings tumbled by four percent to $10.810 billion in the first four months of the year from $11.275 billion in the same period last year.
For April alone, shipments of electronics plunged by 28 percent to $1.088 billion.
Aside from a lower export target, the DBCC also readjusted its growth projection for gross national product or GNP to a range of 3.5 percent to 3.9 percent, lower than the original projection of four percent to 4.5 percent.
Government economic managers also revised their foreign exchange rate assumption for the year to P49 to P50 against the dollar from the original range of P47 to P49.
And even though the Bangko Sentral ng Pilipinas (BSP) and the Bureau of Treasury are trying to peg interest rates at single digit levels, the DBCC said rates for the bellwether 91-day Treasury bills will average at 12 percent.
Government’s top economic managers will meet today to decide if new adjustments in Philippine growth for the next five years are necessary, given the recent decision to downscale the gross domestic product (GDP) target for the year to 3.3 percent to 3.8 percent from 3.8 percent to 4.2 percent.
The economic team is seeking to preserve the fiscal program in light of the administration’s resolve to contain the national budget deficit at P145 billion this year even as it reduced its GDP projection.
Based on earlier drafts of the Medium-Term Philippine Development Plan (2001-2004), GDP should grow by 4.9 percent to 5.5 percent in 2001.
Annual GDP growth targets in the draft MTPDP are 5.4 percent to six percent for 2001; 5.9 percent to 6.5 percent for 2004; 6.1 percent to 6.7 percent for 2005; and 6.3 percent to 6.9 percent for 2006.
The slower growth rate is consistent with the 3.3 percent GDP projected earlier this year by the International Monetary Fund (IMF).
The IMF said the lower GDP projection was a result of weak consumer spending and private sector investment despite the return of investor confidence.
The IMF, which lowered its export growth forecast this year for most Asian economies, said the US economy will only begin to recover next year.