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R.P. economy grows 4.5 percent in 2003

By JOSE VILLANUEVA
TODAY Reporter

The Philippine domestic economy grew by 4.5 percent in 2003, slightly faster than 4.4 percent a year ago, with solid gains in the services sector, boosted by the country's wireless boom, mitigating adverse global and domestic developments throughout the year.

The country's gross domestic product (GDP) growth exceeded the lower end of the Arroyo administration's full-year growth forecast of 4.2 percent to 5.2 percent. In the last quarter of the year, though, growth slowed to 4.5 percent from 5.1 percent the previous quarter which economists attributed to a "base effect" caused by the unusually robust crop harvest in the latter half of 2002 than in 2003.

Measured by gross national product -- GDP plus income earned abroad -- grew strongly by 5.5 percent for the entire year from just 4.5 percent in 2002, due to stronger-than-expected overseas Filipino worker (OFW) remittances. Bucking expectations of flat growth due to a decline in overall deployments, OFW inflows grew by a whopping 18.8 percent, as more Filipino workers landed higher-paying professional jobs.

In a news conference, Socioeconomic Planning Secretary Romulo Neri noted that the economy successfully weathered threats from the El Niño drought on farming, Asia's SARS outbreak and the US-Iraqi war's curtailing of global trade and investment, and domestic peace and order problems like the July 27 Oakwood siege on business activity.

"The economy's performance bucked the assessment at about this time last year of most private sector analysts, credit-rating agencies and multilateral agencies, that projected growth to be far below the government's forecast," Neri said.

This year, the administration sees GDP growth picking up its pace to 4.9 percent to 5.8 percent, with the global economy in the throes of recovery. Neri said he was confident the target would be met since he sees the telecommunications sector sustaining its robust clip.

The service sector remained the economy's main cylinder throughout 2003, where growth stood at a whopping 5.9 percent from just 5.4 percent the previous year. Services saw its highest quarterly growth of 6.5 percent in the last quarter, led by the transport, communications and trade subsector.

Agriculture, which employs a third of the country's work force, grew annually by 3.9 percent from the previous year's 3.3 percent, thanks to the government's efforts to head-off El Niño's fallout beforehand. Neri downplayed the economic impact of the bird flu, though he said farmers are cutting down their inventories of poultry and that consumers are shifting to other meat products.

Reflecting the weakness of the factory sector, which suffered lower export sales due to the global economic slump, the industrial sector grew by just 3 percent compared to 2002's 3.7 percent. Asia's SARS epidemic and jitters over the US-Iraqi war cut down orders among the Philippines' chief trading partners, bringing full year growth to just 3.3 percent, well below the 5-percent rate that was originally anticipated.

Neri said he was turning more bullish about the manufacturing sector, whose output in volume terms fell by eight percent in November, since an improving global economic outlook has lifted business sentiment in markets like the US, Europe and Japan. He said factory output growth would pick up by the first quarter and that exports could increase by as high as 10 percent this year.

Neri said achieving the government's targets depends on macroeconomic stability, fiscal discipline, and stable financial and capital markets. Neri described the peso's recent depreciation as having both positive and negative effects on the economy, since it boosts exports while putting pressure on public debt.

Neri added that he expects inflation to come in at 3 percent in January, slightly slower than 3.1 percent in December. the government is targeting a rate of 4.5 percent this year.

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