Challenge for next chief: Sustain high growth rate

05/31/2010

The next administration faces the tough challenge of sustaining the high growth rate thus far for the year and making sure that such growth filters down to the grassroots of society.

Business leaders and economic analysts gave the following reports that the country posted a 30-year high 7.3 percent growth in gross domestic product (GDP) during the first quarter. The Palace have said that the recent strong GDP growth “was a fitting punctuation to an administration that effectively kept the national economy afloat amid hostile economic environment on both the domestic and global fronts.”

“The challenge faced by the government now is how it is going to try to distribute the fruits of that growth to provide some relief to our people,” said Economics professor Solita Monsod in a television interview Saturday night.

Experts twitted presumptive president-elect Sen. Benigno Aquino III for claiming that such encouraging economic indicator was due to election spending by the candidates in the May 10 polls. They pointed out that ascribing the growth to election spending would be incorrect because one percent of GDP is equivalent to P22 billion, hence it was statistically impossible for the polls to expand the GDP by seven percent.

What actually pushed the economy upward was a confluence of increases in foreign direct investments, 12 percent improvement in tax collections, and heightened activities in the export sector following global financial recovery, the analysts said.

“Mr. Aquino will soon have his time to prove his mettle as an economic manager and show us how he intends to top or even match the growth and sustain it for the next six years,” they said. “Or will he alter the tax structure — and cast aside his campaign promise not to impose new taxes — just to keep the economy going?” they added.

Meanwhile, business and industry leaders, notably Albert Lim of the Makati Business Club and Ambassador Donald Dee of the Philippine Chamber of Commerce and Industry also hailed the better than expected 7.3 percent GDP growth, hinting that it augurs well for a strong economy under the new administration.

International economist Ashira Perera of the Capital Economics, citing a study entitled “The Philippines’ Strong Start in 2010 is Likely to Last,” predicted that overnight borrowing and lending rates would go up by one percentage points this year as a result of the 7.3 percent GDP growth.

Capital Economics reportedly revised its GDP growth forecast for the Philippines from 4.5 percent to 5.5 percent in light of this welcome economic development.

JP Morgan, a US-based investment bank, was even more bullish as it amended its predictions from 4.5 to 6.8 percent following reports by the National Statistics Office (NSO) and the National Statistics Coordination Board (NSCB) that the national economy expanded by better than expected 7.3 percent year-on-year growth in GDP and a 9.5 percent growth in gross national product (GNP) during the first three months of 2010.

“The first quarter GDP will probably be as good as it gets for this year and in 2011,” Capital Economics said.

First Grade Holdings managing director Astro del Castillo gave President Arroyo and her economic team 7.5 to 8 points out of 10 for their efforts in “strengthening investments and keeping the economy afloat with positive growth throughout the financial crisis.”

“It’s an applaudable performance. Her administration survived several crisis, including political crisis. I have to give credit to the reforms she put in place and implemented for the economy,” Del Castillo said, citing the successful implementation of expanded value added tax, among others.

The analysts explained that most Filipinos did not feel the benefits of economic recovery, particularly in terms of employment under the Arroyo administration on account of the crippling effects of the El Niño weather phenomenon and the series of strong typhoons that swept the country last year.

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