OFWs to spare RP from debt default

Manila Times
Tuesday, May 17, 2005

OFWs to spare RP from debt default
By Darwin G. Amojelar, Researcher

HIGHER remittances from overseas Filipino workers (OFW) and exports will ensure that the country will not go the way of Argentina, a top official of the National Economic and Development Authority (NEDA) said.

“The structural rigidities that caused Argentina to collapse are not with us,” Scholastica Cororaton, assistant director of the Neda’s National Planning and Policy Staff, said.

Cororaton explained, “apart from the debt-to-gross domestic product (GDP), Argentina had fixed exchanged rates and its debts [were] mostly [incurred by the] private sector.”

Cororaton noted that the country has stable source of dollars from OFW remittances and exports to service the country’s debts.

“Remittances is one of the biggest source of dollars that boosts our economy,” she said.

Last year, inflows of OFW money rose by an unprecedented 11.8 percent, reaching $8.5 billion from $7.6 billion in 2003.

The Bangko Sentral ng Pilipinas expects remittances to grow by 10 percent this year from an earlier target of 6 percent.

“There’s a fiscal weakness but [its not like] Argentina,” Cororaton said.

She added that unlike Argentina, the Philippines has long-term debts.

“If we look on the debt service to exports, we are in a better position,” she said adding that Argentina had a 455-percent debt-service-to-exports ratio compared to the country’s current 20 percent ratio.

Cororaton echoed earlier statements by Finance Secretary Cesar Purisima that the country’s balance of payments inflows are steady with growing remittances from OFWs.

The finance secretary added that the country’s larger external sector gives it greater flexibility to service its foreign debt.

Exports last year were equi­valent to 45.8 percent of gross domestic product, he said.

Earlier, Tom Byrne, an analyst at Moody’s Investors Service compared the Philippines to Argentina’s situation in 2001.

He said the Philippine’s fiscal ratios showed that the country is in much worse shape than Argentina in 2001.

Byrne said that the Philippines’ debt of $75 billion is equivalent to 525 percent of its revenue last year; almost double that of Argentina’s debt ratio before its $95-billion default.

Neda upbeat on economy despite weak agri output

On top of a different fiscal profile, Cororaton said the Philippine economy could weather existing problems including a weak farm sector in the first quarter, as growth is still sent to reach 5 percent.

She said the half-a-percent growth in farm production was expected because of the El Niño phenomenon. The 0.55-percent growth rate is the lowest in four years.

She said that low agriculture production was already factored in on the 5-percent projection on gross domestic product (GDP). Agriculture sector production accounts for a fifth of the domestic economy.

Cororaton had attributed the slowdown to the continued high inflation rate, a low growth in exports and poor farm growth.

A NEDA statement earlier issued cited that service and manufacturing sectors will boost the economy in the first quarter of this year.

The Department of Agriculture has reported that agriculture output inched up during the first quarter from 7.93 percent in the same period in 2004 due to a dry spell. The country has been experiencing warm weather, hitting a high of 38.8 degrees Celsius early this month.

On May 30 the National Statistical Coordination Board will release the Philippine economy’s first quarter performance.

Socioeconomic Planning Secretary Romulo L. Neri earlier said the projected growth in the economy is still positive.

In the fourth quarter of 2004, the Philippine economy grew 5.4 percent from 6.4 percent in the same period in 2003.

The fourth-quarter figure, however, was lower by 0.9 percent from the 6.3 percent posted in the third quarter.

In 2004 the economy grew 6.1 percent, the highest in 15 years.

The growth of the economy was bolstered by the strong performance of all three major sectors: agriculture, fishery and forestry, which grew 4.9 percent; industry, 5.3 percent; and services, 3.37 percent.

Under the Medium-Term Philippine Development Plan, the domestic economy would grow anywhere between 5.3 percent and 6.3 percent this year and 6.3 percent in 2006 and 6.5 percent in 2007, 6.8 percent in 2008 and 7 percent in 2009 and 2010.