Soaring food, oil prices drag Q1 economic growth to 5.2%

MANILA, Philippines- The local economy grew 5.2 percent in the first quarter of 2008, barely making the lower end of the National Economic and Development Authority's (NEDA) expectations, slowed down by higher oil and food prices during the period. Economic growth was recorded at a revised 6.4 percent in the fourth quarter of 2007. In a press briefing on Thursday, NEDA said that seasonally adjusted gross domestic product growth came in at 0.8 percent in the first quarter, from 1.3 percent in the previous quarter. Gross national product, which includes the economic contributions of Filipinos and Filipino companies abroad, rose 7.3 percent during the same period, NEDA said. Net Factor Income from Abroad, GNP's main component, zoomed 30.3 percent in the first quarter. GDP growth during the period was driven by a 6.9 percent growth in the services sector. The industry sector also posted a 3.9 percent growth, while the agricultural, forestry and fisheries sector registered 3-percent growth. "The domestic economy continued to remain firm notwithstanding the growing difficulties in the external environment," Santos said. However, Santos admitted that the country should brace for a slowdown and expect tamer growth rates every quarter this year. Prolonged slump? "We are experiencing an economic slowdown that is generally caused by inflation, which is caused by high oil and food prices... From where I'm sitting, I see no end to [these]," he said. Santos also said that the economic slowdown abroad hit the Philippines harder than it did other Asian countries because the country is a heavy oil and fuel importer. He also said that exports were weak in the first quarter because of the economic crunch in the United States, the Philippines largest export destination. Former NEDA chief and University of the Philippines economics professor Cayetano Paderanga also expects a protracted economic slump for the Philippines. "The slowdown was expected and will continue before things start to turn up. Most hope it could come mid to late 2009, but it could come late 2010," Paderanga said. NEDA earlier said it expects the economy to expand within a range of between 5.2 percent and 6.2 percent - a downgrade from an earlier target range of 6.3 percent to 7 percent. The downward adjustment was made on the basis of a higher assumption for oil prices, a crucial commodity in the economy because of its wide range of use across all industries. The country's forecast for Dubai crude, the benchmark for the commodity was tweaked to between $95 and $105 per barrel, from $80 to $90 a barrel previously. Inflation, the measure of the year-on-year rise in consumer prices, shot up to a three-year high of 8.3 percent in April from 6.4 percent in March due to the unabated rise in oil and food prices. Last year, the Philippine economy expanded 7.3 percent, the fastest pace of growth in more than three decades. – GMANews.TV