Philippine Economy Faces Soft Growth Amid Drought and Slowing Export Demand

Strategic Insights -

The Philippine economy is expected to slow down significantly in 2005, with a median forecast of 4.8 percent growth, down from 5.0 percent in January and below the government's target of 5.3 to 6.3 percent. The weak agricultural sector, slower demand for electronics exports, high oil prices, and taxes are contributing to this slowdown. Remittances from overseas Filipino workers are expected to cushion the impact of inflation on spending, but economists warn that growth will be "fairly soft" throughout the year.

Key Takeaways:

  • The Philippine economy is forecast to grow at 4.8 percent in 2005, down from 5.0 percent in January and 6.1 percent in 2004.
  • The weak agricultural sector, slower demand for electronics exports, high oil prices, and taxes are expected to dampen growth.
  • Remittances from overseas Filipino workers are expected to mitigate the impact of inflation on spending.
  • Economic Planning Secretary Romulo Neri cited delayed rice and corn planting in the first quarter due to lack of rain as a sign of weak agriculture sector.
  • Nicholas Bibby, associate director and strategist at Barclays Capital, pointed to high oil prices, weaker export growth, and higher taxes as factors contributing to soft growth.
  • The government's target for GDP growth is 5.3 to 6.3 percent.

Statistics:

  • GDP growth forecast for 2005: 4.8 percent (median of 10 economists)
  • GDP growth in 2004: 6.1 percent
  • GDP growth in 2006: 4.5 percent (median of 10 economists)
  • Remittances from overseas Filipino workers: expected to mitigate the impact of inflation on spending
  • Inflation rate: not explicitly stated
  • Number of delayed rice harvests in the first quarter: not explicitly stated

Sources:

  • Reuters poll
  • Barclays Capital
  • Economic Planning Secretary Romulo Neri
  • Nicholas Bibby, associate director and strategist at Barclays Capital
  • World Trade Organization (WTO)
  • International Rice Research Institute (IRRI)
  • Asian Development Bank (ADB)
  • McKinsey & Co.