Government sticks to 5.3% GDP growth target for 2005

The National Government will stick to its gross domestic product (GDP) growth target of 5.3 percent for the whole of 2005 despite continued threats from external forces such as skyrocketing world oil prices.

"The Development Budget and Coordinating Committee (DBCC) has not made any changes to the country’s growth target," said Socioeconomic Planning Secretary Augusto B. Santos.

The DBCC, headed by the Secretary of Budget and Management, recommends to the President the level of annual government expenses and government spending limits for economic and social development, national defense, and government debt service. It also earmarks expenditures for each development activity between current operating expenditures and capital outlays.

Santos added that the second quarter growth rate will remain in the 4.7- to 5.1-percent range.

The DBCC is scheduled to meet by the end of this month to review all growth targets in lieu of escalating world oil prices and its impact on economic growth. The second quarter growth results will be released within the week.

Most analysts estimate second quarter results at at the lower end of the range or lower than five percent. The first quarter GDP growth was 4.6 percent. That means the anticipated first semester growth figure will likely range between 4.7 to 4.9 percent.

Santos, who is also the director general of the National Economic and Development Authority (NEDA), said the three main pillars of the economy will remain as drivers of growth.

"With the absence of the El Niño phenomenon, we expect a rebound in the agriculture sector (including fishery and forestry), which is forecast to have grown 2.3 percent for the second quarter of this year," he said.

The services sector, foreseen to have grown by six percent in the second quarter of the year, is expected to continue on its upward growth with better prospects in business process outsourcing (BPOs) such as call centers. Higher tourist arrivals would also drive growth in both industry and services sectors.

According to Santos, the expected rebound in the mining industry would greatly contribute to the growth of the sector this year.

"We expect the mining industry to perform better starting the third quarter, especially with the soaring of global demand for copper and iron," he said. He added that manufacturing remains the major contributor to the growth in the industrial sector.

Santos earlier reported that simulated studies on the impact of high oil prices on economic growth in the first semester show that if the price of the benchmark Dubai crude hits the vicinity of $60 per barrel, the GDP will likely slip to 5.2 percent for the entire year. If Dubai crude price increases to $70, GDP is forecast at 5.1 percent.

But the NEDA chief stressed that the country’s oil bill is just 37 percent of the country’s total energy requirement.The rest of the country’s needs are fueled by coal, hydro, natural gas, geothermal, and recently, wind.

"The oil bill is substantial but not enough to make a major dent in our economy," Santos stressed.

Likewise, the simulation showed that the inflation level will hover at 8 to 8.1 percent if Dubai crude prices remain at the $60 to $70 a barrel range.