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Govt cuts growth targets amid US rejection of bailout plan


(Update) MANILA, Philippines - Economic managers have further downgraded the Philippines' growth forecast this year, saying the country "will not be spared" from the impact of the United States economic slump. “The economic managers have accepted my suggestion to revise the Philippine economic projections downwards in the light of recent global developments," Socioeconomic Planning Secretary Ralph G Recto said. The revised Philippine economic growth, measured through the rise in gross domestic product (GDP), is seen at 4.4 percent to 4.9 percent. Barely three months ago, the Development Budget Coordination Committee pegged the country's GDP growth at 5.5 percent to 6.4 percent. GDP in 2009 may grow by only 4.1 percent to 5.1 percent from an initial projection of 6.1 percent to 6.9 percent. Growth target revisions came following an economic managers meeting with President Gloria Macapagal-Arroyo on Tuesday, hours after the American legislators rejected a $700-billion bailout package to address the US credit crisis. Recto noted that although the US Congress is seen to pass a better bailout package to aid its distressed financial sector and calm markets, "it won't stop the US economy from going into a recession, which will have an effect on the global economy." The US is one of the largest trading partners of the Philippines. Latest data from the National Statistics Office show that 9.3 million Filipino workers are in the Americas. "The bright side is we expect food and oil prices to stabilize and inflation to be lower. Interest rates may slightly go up and government deficit may be within target," Recto said. 'Unwise decision' University of the Philippines economist and former Budget Secretary Benjamin E Diokno blamed the government's unwise decision of curbing spending this year for the slower economic expansion. Diokno said the recent revision in growth targets is already the fifth downgrade for the year but government numbers remain optimistic. "That's still on the high-side, there's still some element of cheerleading to it," he said. Diokno added the lower growth expectations for this year will mean an ever bigger "disconnect" to the poorest Filipinos. "The growth target for this year will not be constant to all Filipinos. For some, it could mean faster growth, for others it could be flat or even a negative growth," he added. Diokno also called the government's decision to control spending for this year at a time of crisis as "mindless." "They'd have to get their strategies straightened out. They have to decide whether to spend and cushion the impact of an economic slowdown or aim for fiscal consolidation," he said. Diokno noted that Finance Secretary Margarito Teves seemed to be "ambivalent" on the government's tack for this year. "He's maybe thinking whether he will be able to raise enough revenues for the government's spending and keeping the deficit target," he said. In a separate interview, Banco de Oro UniBank Chief Market Strategist Jonathan Ravelas said the market has been anticipating another downgrade in the country's growth target. He said, however, that he was surprised as the latest forecast is lower than the country's average annual growth rate. "Ideally we would still grow by at least five percent because that's our average growth in the last 10 years," he said. The growth target for 2008 has already been recently cut down to 5.5 - 6.4 percent from the original 6.3 - 7 percent, while the target for 2009 was pegged at a 6.1 - 6.9 percent. Last month, Recto said his personal recommendation is to reduce economic targets for this year between 5 percent and 5.5 percent. - GMANews.TV
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