Gross domestic product (GDP) growth, said Philippine Institute of Development Studies (PIDS) President Josef T. Yap, will likely ease to 5.9% this year from the 7.3% posted in 2010 given inflationary pressures and the absence of last year’s election spending stimulus.
There will be no election spending and we’ll have higher inflation in 2011," Mr. Yap said.
The 5.9% GDP growth forecast is lower than the official government target of 7-8%. It is still better, however, than the significantly lower outlooks announced by multilateral institutions such as the World Bank (5%) and the Asian Development Bank (4.6%).
Economic managers have so far said the current target would be kept although some have pointed out that this year’s budget used a 5% growth assumption.
During yesterday’s release of the PIDS Economic Policy Monitor, Mr. Yap said their 2011 forecast assumed a farm sector rebound and continued, albeit slower, industry and services growth.
The agriculture sector, which contracted by 0.5% last year, is expected to grow by 3% this year. Industry and services, meanwhile, were forecast to expand by 7.6% and 5.7%, respectively, from 2010’s 12.1% and 7.1%.
Commenting on the PIDS forecast, University of Asia and the Pacific economist Rolando T. Dy said "3.5% growth" was attainable as "rains enter the country after last year’s drought ... For the first half, rice and corn production will have a tremendous boost".
The government, said Mr. Yap, should be mindful of risks arising from higher commodity prices and unrest in the oil-producing Arab world. He remained optimistic, however: "If oil prices are fairly stable, maybe a 6.5% growth could be achieved".
University of the Philippines economist and former Socioeconomic Planning Secretary Solita Collas-Monsod was similarly optimistic, saying: "Oil price shocks will only result to a temporary slowdown. This has happened before and I don’t see it extending for so long."
In its Economic Policy Monitor, the PIDS said the challenge was sustaining growth and making it "more inclusive so that poverty may be reduced".
It noted the need to raise the investment rate -- "one of the lowest in East Asia" -- to create more jobs. Constraints, the PIDS added, are poor infrastructure, weak institutions and an "unstable" macroeconomic environment.
It called for new tax measures to increase revenues, noting that curtailing spending will in the long run compromise the country’s commitments to achieve the United Nations-sponsored Millennium Development Goals.
The "least distortionary options" available with respect to new taxes, it said, are the restructuring of excise taxes on so called "sin" products, rationalization of fiscal incentives, and reforming the road user charge.
The manner of state spending also has to be looked at, it said, as poverty grew despite economic growth. For the latest updates PRESS CTR + D or visit Stock Market news Today
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