RP economy may have shrunk in second quarter

(Updated 4:33 PM) The Philippine economy may have contracted during the second quarter this year, possibly the first time the country’s output shrank in more than ten years, a senior government economist said on Thursday. From April to June, the Philippines’ gross domestic product (GDP) could have hit anywhere from -0.1 to 0.9 percent, Dennis Arroyo, the National Economic and Development Authority’s (NEDA) director for national planning and policy staff. He cited the continued weakness of all sectors and constricted consumer spending. "The forecast is based on the latest indicators such as agricultural performance, exports and imports figures, Missi (Monthly Integrated Survey of Selected Industries), consumer goods sales, corporate profits, OF (overseas Filipinos) remittances, and other relevant data and information that have impacted on the second quarter performance of the economy," Arroyo said If economic growth falls within NEDA’s low-end expectations, it would be the first time the Philippines tip into a contraction since the 1997 Asian crisis. Despite the forecast, Arroyo said the Philippines is in no danger of gliding into a recession. “It’s possible that there will be a recession but still unlikely. So there is a one in 10 chance of GDP recession," Arroyo said. Developed economies such as Japan, France, Hong Kong and Germany’s were seen to emerge out of recession within the year, he cited. Even if the economy shrinks in second quarter, Arroyo said it still could not be defined as a “recession" because its technical definition is two consecutive quarters of negative growth. Consumption – which comprises up to 80 percent of the economy – is expected to pick up in the third quarter, he said. In the first three months of the year, the gross domestic product was recorded at 0.4 percent. Farming output, which comprises about 20 percent of the domestic economy, was pegged to have grown between 0.4 and 1.4 percent. Industry, which contributes 30 percent of the economy, was seen to have slumped at between -2.9 and -1.3 percent. The historic declines in the manufacturing subsector dampened the sector’s performance in the April to June period. “From 6.1-percent growth in the second quarter of 2008, the growth rate of manufacturing subsector is expected to remain negative in the second quarter of this year," Arroyo said, citing contractions in...[the] Missi and the country’s exports. Services, which makes up half of the economy, likely pulled a slower growth of between 1.7 and 2.2 percent. The sector remains the economy’s “main growth source," with “sustained performance of the offshoring and outsourcing sector, and the growth in health and wellness, retirement, and medical tourism," Arroyo added. The government is set to announce the official economic figures for the second quarter on Thursday next week. A recovery is seen in the third quarter owing to the drop in inflation and a boost in consumption. Although August’s inflation rate may turn out to be lower than July – which at 0.2 percent is already the lowest in 22 years – election campaign spending and remittances will help boost economic activity. - GMANews.TV