2005 Growth Rate

Gov't keeps 2005 growth target for now despite oil prices
Agence France-Presse

GOVERNMENT officials on Monday kept the 2005 economic growth target unchanged at 5.3 percent despite surging oil prices and rising US interest rates, which they said would push inflation and curb both global and domestic demand.

Gross domestic product (GDP) growth slowed to 4.7 percent in the first half of the year. The economy will need to grow by nearly six percent for the rest of the year to achieve the target growth.

"Challenges seen in sustained high oil prices and increase in US interest rates may curb growth in exports and consumer spending," Economic Planning Secretary Augusto Santos told a government briefing.

However, he said, the economy should manage 5.9-percent growth in the second half of the year.

This rests on agriculture growing 5.1 percent, after 0.7 percent recorded in the first half amid a drought, with industry and services keeping their first half pace.

"Despite the challenges, the economy is expected to grow as targeted, buoyed by investments in sunrise industries and the recovery of agriculture," Santos said, citing renewed activity in the mining sector.

Trade and Industry Secretary Peter Favila said the government had approved 23 new mining projects.

"The policy agenda will focus on implementing structural reforms that will increase competitiveness, improve productivity and sustain job growth," Santos said.

Budget Secretary Romulo Neri said that with the Supreme Court ruling last week that an expanded value-added tax law passed earlier this year was constitutional, the proposed 2006 national budget would allow for "higher spending given favorable revenues."

He said this should lead to "higher infrastructure spending" to make the country more attractive to investors.

Governor Amando Tetangco of the central bank warned that "average inflation in 2005 and 2006 will likely exceed targets" at 7.9 percent this year and 7.5 percent in 2006, compared with government goals of 5.0-6.0 and 4.0-5.0 percent, respectively.

"Second-round effects" such as wage increases and "volatility in the exchange rate" are expected in the short term, he added.

He said Philippine foreign reserves amounted to 17.67 billion dollars as of July, equivalent to nearly four months' worth of imports, while salary remittances of the large Filipino overseas workforce remained robust and investment flows were strong. With INQ7.net