Economy seen performing better in 2010 despite risks

MANILA, Philippines - The government remains optimistic that the domestic economy in 2010 will improve in line with a global rebound as early signs indicate, a top economic manager said.

“There is a global economic rebound this year and there are good signs coming. Exports are rebounding although we have El Niño. Also, inflation is moderate,” said acting Socioeconomic Planning Secretary and National Economic and Development Authority (NEDA) acting director-general Augusto B. Santos at the Philippine Economic Briefing in Cebu City.

He added that the government is still maintaining its macroeconomic targets. “There may be a reduction in our agricultural output, but there will definitely be gains in other sectors,” he said. The Cabinet-level Development and Budget Coordinating Committee’s 2010 target for gross domestic product (GDP) is 2.6-3.6 percent while for gross national product (GNP), 4.7-5.6 percent.

In his presentation to business and economic leaders in Cebu, Santos said attaining the full-year 2009 DBCC’s growth rates for GDP and GNP is already an encouraging development for the country.

“This positive performance should be taken as an opportunity to further bring the Philippine economy to a higher level of growth in 2010 and beyond,” the NEDA official said.

However, while the government is upbeat for 2010, Santos said they are also mindful of the risks that can affect macroeconomic stability. These include global economic conditions, crude oil prices, exchange rates, natural calamities and narrowing sources of investment.

“We are aware that the world recovery remains fragile. Crude oil prices have been rising in the world market, ever since green shoots began appearing last year. That in turn may put some pressure on consumer prices, backed up by utility rate hikes,” he said.

The US dollar, Santos said, is still uncertain but more volatility is expected this year compared to 2009.

“Aware of these risks however, the government is committed to implement the appropriate policies that will provide the right environment for our key growth drivers,” he said. These drivers include outsourcing, finance, mining and quarrying, public construction, government services and medical tourism.

Moreover, Santos said the government will continue to build on its strategic pillars in order to provide a stronger foundation for future growth and development.

The government stands firm in providing a clear framework for economic stability. This entails a sustainable fiscal position and macroeconomic policies that lead to prolonged high growth, more domestic employment and lesser inequality. “We must address the country’s problems in bottlenecks to competitiveness, particularly corruption and still-inadequate infrastructure,” stressed Santos.

He added that the government is committed to accelerating public investments in infrastructure. The World Bank in its publication “Philippines: Meeting Infrastructure Challenges” earlier gauged that the country needs to spend at least five percent of its GDP annually on infrastructure.

Santos noted that this is clearly defined in the Philippines’ Comprehensive and Integrated Infrastructure Program (CIIP). “Average spending per year under the CIIP is more than that five-percent threshold,” he said.

Santos also said the main challenge for this year is for the next administration to sustain the rebound that the country is experiencing and curtail the ballooning budget deficit.

“The challenge is to continue to boost this economic growth, to pump prime the economy, particularly with infrastructure spending. NEDA has been saying, time and again, that we have to continue our stimulus policies,” he added.