Business and Economic Prospects of 2007

By: Institute for Negros Development, University of St. La Salle

Date: March 9, 2007 at the Santuario De La Salle

Resourse Speaker: Dr. Cielito Habito (former NEDA Secretary- Pres. Ramos)

YEAR 2006

                STRENGHTS

1)      Inflation continues to ease

2)      Overall output growth is robust - farm output up; growth in manufacturing and exports up with double digit

3)      Fiscal improvement

4)      Interest records low

5)      Overall foreign investment brisk growth

6)      Overseas income went up

7)      Slight improvement in employment

8)      Equity, currency markets on the bull

WEAKNESS

1)      Unemployed worsened

2)      Underemployment increased

3)      Overall investment anemic due to falling domestic investment

4)      Key service industries e.g. communications slowing down

5)      Private construction falling

6)      Import growth remains sluggish

7)      Hunger incidence hits record high at 19%

8)      Self rated poverty above 50%; human welfare indicators worsening

9)      Key reversals cast doubt on durability of reforms

YEAR 2006 REVIEWS:

1)    Prices and incomes show some qualifying improvement but the already bad jobs situation got worse

2)    The positive economic reviews remains largely in the financial realm and has yet to hit the ground or are not direct investments

3)    Inflation target is 4.0 to 5.0% from the year 2006 6.2% inflation rate.

4)      GNP from 1st quarter 6.5% decreased to 4^th quarter 5.9%

5)      GDP from 1^st quarter 5.7% decreased to 4.8% in the 4^th quarter

6)      Agriculture from 1^st quarter 3.8% decreased to 4^th quarter 1.9%

       Sugarcane from 18.3% 1st quarter increased to 57.7% in 3^rd quarter while Palay suffered the worse decline due to several storms in the year 2006

7)      Growth is coming from agriculture and trade/retail and wholesale but these

two sectors only contribute to 28% of jobs.

8)      Unemployment increased to 7.9%; underemployment 22.7%

9)      Government deficit went down to 6.2%

10)   Debt interest payments took up 1/3 of the debt fiscal balance

11)  Import sluggish but 85% of imports are inputs for production.

12)  Filipinos don't look at the economic improvements on the long term because they are clouded by political developments

ECONOMIC FORECEASTS FOR YEAR 2007

1)      Externally as indicated by the IMF global growth will decline from 5% to 4.9%

2)      USA - cooling housing market to dampen private consumption as deficit is seen to rise to 6.9%; GDP growth from 3.4% to 2.9% in year 2007.

3)      The US dollar is weakening while Europe is seen to have rising investments

4)      China will sustain a 10% growth while Japan will have a 2.1% growth in 2007 from a 2.7% in 2006.

5)      Electronics market - There is excess chip inventories thus a lowdown of exports in year 2007.

6)      Most countries will have fiscal crises due to aging population availing of social services

7)      There are mixed Domestic driven influences such as tapering of inflation

8)      Improved gov't fiscal position while there will be strong gov't expenditures

9)      Surging overseas remittances which will increase consumption

10)   Persistent political conflict which will divert gov't attention and resources

11)   Due to elections there will be a wait & see investment stance

12)   Mixed pressure of the Peso but despite its appreciation our exports still continue to be competitive as our peso is not driven by the internal economy but is moving in tandem with the rest of the world's economy/currency.

13)   BPO office space demand is surging in real estate while there is persistent need for low to medium cost housing as the OFW remittances are channeled to housing and retirement estates is increasing.

14)   Banks will increase their exposure to consumer financing

15)   Projected GDP growth is 5.6%

16)   Inflation is projected at 5.0%

17)   Unemployment rate is projected at 9.0%

18)   Inflationary impact is negligible in the first half of year due to elections thus 1st half of the year will have the fastest growth while slowest in the 4^th quarter

IMPERATIVES:

1)      Sustain improvement in tax efforts

2)      Strategic infrastructure investments more focus

3)      Intensify SME promotion and development

4)      Mobilize savings from remittances toward more productive investments

5)      Restore domestic investor confidence

6)      Closure to the legitimacy of the present leadership

7)      Reform political and electoral processes

8)      Put aside CHA-CHA

9)      Build on LGUs good practices and success stories

10)   Buy Local and create jobs, ask for a receipt to prevent tax evasion