Rising oil prices, interest rates to put brakes on RP's growth
Rising oil prices, interest rates to put brakes on RP's growth
Cecil Morella, Agence France-Presse, Manila
Rising oil prices and interest rates will lead to slower economic growth in the Philippines for the rest of the year after a 6.3 percent expansion in the first half, the government said on Monday.
Strong foreign and domestic demand helped push gross domestic product (GDP) growth to 6.2 percent in the three months to June despite tensions linked to the May presidential election and a surge in global oil prices, Economic Planning Secretary Romulo Neri said.
A 6.4 percent expansion in the domestic economy in the three months to March helped bring first half GDP growth to 6.3 percent.
Neri said 2004 growth should still be within the official target of between 4.9 and 5.8 percent as the twin threats of higher oil prices and interest rates undercuts the prospects for the rest of the year.
"The fact that the expansion in the first semester (half) was boosted by the recovery in the global economy gives us reason to be concerned and cautious in the second half since rising oil prices are now threatening to slow down growth," Neri told a news conference.
The inflationary effect of higher oil prices would rein in consumer spending, while rising U.S. interest rates would put pressure on local interest rates as well as the peso, "which can dampen investments," he added.
The rate-hike moves by the U.S. Federal Reserve should also "soften the ongoing global recovery, thus curbing the growth of merchandise exports" from the Philippines, Neri said.
Personal consumption and the services sector were the main growth drivers in the three months to June, said Romulo Virola, head of the National Statistical Coordination Board.
Personal consumption jumped 6.0 percent due to election- related spending and increased use of mobile telephone services, compared to 5.3 percent in the same period last year.
By contrast, government consumption rose only 0.1 percent with President Gloria Arroyo "struggling with a growing budget deficit," Virola said.
On the production side, services output rose 7.3 percent compared to a 5.7 percent clip in the same period last year.
Industrial output also picked up, rising 5.6 percent compared to 3.6 percent a year earlier, while agriculture grew 4.3 percent compared to 1.6 percent.
Despite the healthy growth, Neri noted that Manila's Asian neighbors "are growing at much more robust rates" amid favorable global economic conditions.
The Arroyo government must "raise the level of competitiveness and investments if the Philippines is to shift to a higher growth path over the medium-term."
Philippine growth should pick up to a range of 5.3 and 6.3 percent next year "but achieving this will hinge on the successful implementation of measures that will boost competitiveness and investor confidence that will broaden the base of growth in manufacturing," Neri said.
Economists warned earlier this month that Manila could fall into an Argentina-type debt default within two or three years while Arroyo roiled the markets further by saying that the country was already in the throes of a "fiscal crisis".