UA&P economist sees 5.7% GDP growth this yr

The country will experience a slower growth of 5.7 percent in its gross domestic product (GDP) this year as demand for exports are expected to taper off, an economist said yesterday.

In a press briefing, University of Asia and the Pacific School of Economics dean Peter Lee U said the country’s exports growth is seen to slow down this year at 10.5 percent when compared to the estimated export growth in 2006 of 13.8 percent.

The slowdown is attributed to an expected soft landing of the global economy as consumption consumers in the US – the world’s biggest economy – is seen to lessen. However, U said the country will not be severely affected by the global economic slowdown as the country’s largest exports go to China. "I don’t think we will be affected too much. Our market for our largest exports which is electronics or semi-conductors is China," he further explained.

The UA&P economist said he expects the 2006 growth to be at the tail end of the government growth projection of 5.5 percent to 6.1 percent. "The third quarter was disappointing but far from a disaster," he noted.

In spite of this, he warned that the growth the country is experiencing could not be sustained as it is driven primarily by consumption spending which is, in turn, supported by overseas Filipino workers remittances.

"This cannot be sustained indefinitely and will definitely not ratchet the country’s growth trajectory to the next level so that it can consistently grow at levels of seven percent to nine percent that our neighbors seem to routinely do," he said.

He added investments in new capital and to replace worn out capital are needed if an economy is to increase growth capacity. "In this department, the country’s performance has been particularly worrying as gross domestic capital formation has been falling for the last six quarters and as a percentage of GDP consecutive years."

Foreign investors have already complained of the poor infrastructure and have cited it as one of the reasons why they hesitate to invest in the country. Poor infrastructure translates to high operating costs.

To solve this problem, he said the country must raise tax revenues in order to invest more in infrastructure. For the year, the government has not lined up any new taxes which can improve tax collection.