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By Darwin G. Amojelar, Reporter
THE country’s economy may grow at a slower
pace this year as prices of goods and services are likely to remain
high, the United Nations Economic and Social Commission for Asia and
the Pacific (UNESCAP) said Friday.
In its Economic and Social Survey of Asia and
the Pacific 2008, the UN body said the Philippine economy, as
measured by its gross domestic product (GDP) is projected to grow by
6.7 percent this year, down from a three-decade high of 7.3 percent
last year.
For this year, the government targets between
6.3 and 7 percent GDP growth.
Jovi Dacanay, economics professor at the
University of Asia and Pacific (UA&P), said robust private
consumption as a result of booming remittances and investment will
help the economy to grow at a moderate pace.
“We expect that the domestic demand would help
GDP to grow,” Dacanay said.
Last year, private consumption increased 6
percent, while investment went up 10.4 percent.
Felipe Medalla, economist from University of
Asia and the Pacific and former socioeconomic planning secretary,
warned that the economy will be worse this year than last year.
“That recent economic growth [which] is
highest in three decades is all likelihood statistically fiction,”
he said.
The UN report said Indonesia is likely to grow
6.2 percent; Malaysia, 5.8 percent; Singapore, 7.9 percent;
Thailand, 5.1 percent; and Vietnam, 8.2 percent.
The report also said that the region is entering
a phase of heightened uncertainty this year.
“The subprime crisis in the United States is
still unraveling, and a significant slowdown of the United States
economy and further turmoil in financial markets cannot be ruled
out,” Unescap said.
It noted that under a worst case scenario with
the US falling into recession and a deeper depreciation of the
dollar, “the impact on much of the region will be harsh.”
For the Philippines the impact would be a
decline in GDP by 2.2 percentage points
The UN report said inflation is likely to
increase 3.5 percent from 2.8 percent last year, with prices of
food, beverages, and tobacco to cause the upward pressure.
Last year, the peso appreciation of about 15
percent against the dollar put significant downward pressure on
price increases. “The low inflation outcome of 2007 paved the way
for significant cuts in interest rates by the central bank with
overnight interest falling to 5.25 percent,” the Unescap said.
The report said that with the march toward
biofuels apparently unstoppable, the region has to prepare for
imported inflation through higher food prices. “Governments need
to carefully consider the impact of biofuels on the poor,” it
said.
For many countries in the region, food prices
are a bigger inflationary concern than oil prices, because food
accounts for a far higher proportion of consumer spending. In the
Philippines, food accounts for 50 percent of the consumer price
index (CPI), far more than the 7 percent for energy.
In India, food represents 46 percent of the CPI,
in Indonesia 42 percent, and in China 33 percent.
“Food price inflation hits low-income
households, so governments may need to target the poor with food
stamps and cash,” UNESCAP said.
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