NEDA officials also said the forecast for the second quarter GDP growth has been scaled down to between 4.7 percent to 5.1 percent. The original forecast was placed at five percent made last month by then NEDA director general Romulo Neri, now head of the Deparment of Budget and Management.
Dennis Arroyo, head of NEDA’s national planning and policy staff, said while the economic fundamentals reflect positive growth from April to June, the ongoing political turmoil has pushed growth figures down.
The continued political instability, he added, will remain the single biggest internal factor that would keep the full year GDP figures depressed.
GDP grew 4.6 percent in the first three months this year when a dry spell hobbled farm output, which accounts for about a fifth of economic output.
Other negative factors were the inflationary impact of higher power rates, higher transport fares, higher fuel costs and weaker performance of the country’s exports, particularly the electronics sector.
But NEDA cited that net investment portfolio grew to $1.88 billion in the second quarter of the year or over 13 times that of the same period last year, although it was weaker than in the first three months of the year.
Arroyo said national consumption level grew five percent with the agriculture sector, which reported flat growth in the first quarter, posting a positive growth in April to June. The El Nino phenomena ended in June with the onset of the rainy season.
The government also forecasts another record year for overseas Filipino worker (OFW) remittances to $9.4 billion from the $8.6 billion last year.
"The biggest challenge for government is to raise funds for the development programs outlined in the six-year Medium Term Philippine Development Program as well as attain yearly targets of the fiscal deficit," said newly-appointed NEDA director general Augusto B. Santos.
To sustain the medium term growth plan, the government is banking on its eight-point fiscal program. Three of the eight measures have already been achieved, i.e., the sin taxes, the national attrition law and the expanded value-added tax. However, the EVAT has been suspended.
Santos said government will have to increase tariffs by another one percent as a stop-gap measure for the expected losses from the continued suspension of the EVAT.
The new NEDA head took a position that the National Government should start spending more rather than focus on cutting expenditures. However, he qualified that spending should focus on infrastructure, health, education and nutrition.
"We need to spend. We also need to collect and raise revenues to keep within our target fiscal deficit this year. We feel right now that we can even report a lower figure from the original target of P180 billion," Santos said. "We are also optimistic that we can achieve a fiscal equilibrium between 2007 and 2008."