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Consumer spending in RP averted contraction - poll


Philippine consumer spending likely improved in the second quarter of the year, preventing the economy from slipping into a contraction. The median average of a GMANews.TV poll of five economists showed that the country's gross domestic product (GDP) could have improved 0.98 percent in the April to June period this year. "In direct contrast to the first quarter, consumer spending will underpin the expansion, rather than lead the downturn, likely rebounding by about 1.3 percent quarter-on-quarter," Lim Su Sian of DBS said. “In other words, the rebound in consumer spending will to a large extent reflect a release of pent-up demand." Victor Abola, an economics professor at the University of Asia & the Pacific, offers a different explanation. Although he agrees that the economy grew during the period, the expansion was driven by the construction and financial sectors and aided by government spending. The first quarter of the year saw Philippine economy registering a nearly flat growth of 0.4 percent, a 10-year low, as personal consumption, which makes up two-thirds of the Philippine economy, only expanded by 0.8 percent, the weakest growth since 1986. The dismal expansion forced Manila to downscale its growth assumptions this year to anywhere between 0.8 percent and 1.8 percent, a drastic cut from the previous forecast of a range of 3.1 percent to 4.1 percent after a statistics official remarked that the economy was teetering into a recession. Last week, the National Economic and Development Authority projected that the economy could have contracted by 0.1 percent and a growth of as much as 0.9 percent. The official economic performance for the April to June period will be announced on Thursday. However, economists were split on whether the government would meet its economic targets for this year. Singapore-based consultancy Action Economics predicted a 0.5-percent year-on-year in 2009, which is “slightly below the bottom of the target range," said its executive David Cohen. Abola said mining and exports are seen to recover in the second semester, pushing the economy to a growth of anywhere between 2.5 percent and 4.5 percent. Jonathan Ravelas, chief market strategist for Banco de Oro Unibank, said remittances and favorable foreign exchange for families of overseas Filipinos would enable consumption to pick up. But economist Benjamin Diokno of the Univeristy of the Philippines said OFW families would likely remain saving their incomes as a shield from the global economic slump. Lim said it remains a question whether higher remittance inflows as well as government spending would be able to sustain the country's economy in the remaining months of the year. "The same questions hang over government and business spending - once expansionary fiscal policy winds down, and businesses replace all the plant and equipment they did not manage in the three quarters since the third quarter of 2008, it remains to be seen if the demand cycle will be sufficiently self-sustaining," Lim added. - GMANews.TV

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