PhilippineBusiness.com.ph: The Magazine

Published by

Philippine Business Magazine: Volume 10 No. 9 - Updates

Agriculture Department heading south?

The Department of Agriculture’s central office may be transferred to Mindanao from its main headquarters in Quezon City. President Gloria Macapagal Arroyo expects this move to strengthen her administration’s campaign against poverty. The transfer will enable the DA to be more responsive to the needs of Mindanao, one of the poorest areas in the country. At the inauguration of the newly-built Davao International Airport, she announced, “To maximize Mindanao as the food basket, agricultural modernization and agricultural policies must emanate from Mindanao, not from Manila.”

DA Secretary Luis Lorenzo, Jr., a Mindanaoan whose family runs one of the biggest agricultural companies in the South, reportedly welcomes the development. He is expected to submit a plan for the transfer of his office to the President soon.

Japanese sentiment on Philippines turns positive

Current sentiment among Japanese businessmen in East Asia continued to perk up in October. The Japanese External Trade Organization (JETRO) reported that current business outlooks in the ASEAN region have improved, except for Indonesia. For the first time in 8 months, the current business sentiment for the Philippines turned positive, while indices for Malaysia and Indonesia have remained negative. Elsewhere in Asia, indices for East and South China, Hong Kong, and Korea went up while sentiment in North and Northeast China, and Taiwan went down.

Page 1 | 2

Updates

Signals

Despite SARS, the Iraq war, and the July coup attempt, the domestic economy grew 4.3% in the first three quarters, compared to 3.9% in the same period a year ago. As income from abroad expanded 25.6%, the GNP increased to 5.7% from 3.2%. Services grew 5.6% on the back of stronger finance and real estate sub-sectors. Agriculture was up 3.3% as a record rice harvest recovered from last year’s slump. Industry expanded 3.1%. Personal spending rose 5.0% while real investments bounced back 9.3% from a 9.7% slump last year. Government spending remained tight, contracting 5.1% after growing 2.4% last year. Despite the slowdown in exports, net exports grew 64.1%.

Inflation averaged 3.1% in the first eleven months, maintaining the same rate as last year. General price movements fell within the 4.5%-5.5% inflation target set by the government’s macroeconomic and fiscal agencies.

Five major custodian banks reported a 226.3% rise in net foreign portfolio investments to US$625.5 million in the first eleven months from US$191.7 million a year ago. Inflows in the form of listed and government securities and in peso bank deposits by non-residents increased 24.5% to US$1.5 billion from US$1.2 billion. On the other hand, withdrawals decreased 13.2% to US$0.9 billion from US$1.0 billion.

The average peso-dollar exchange rate depreciated 0.8% to P55.372/US$ in November from P54.952/US$ in October. At the Philippine Dealing System, the peso plunged to its historic intraday low against the dollar to P55.85/US$ last 27 November, reflecting political developments as well as peace and order concerns. The peso closed at a historic low of P55.73/US$ in end-November.

Gross international reserves stood at US$16.8 billion in end-November, 5.4% higher than the US$15.9 billion level of foreign reserves in the same period last year. Reserves cover 4.7 months’ worth of imports of goods and payments of services and income. Using other reserve measures, the GIR is equivalent to 2.8 times the country’s short-term debt based on original maturity and 1.4 times based on residual maturity.

Merchandise exports expanded only 1.0% - way below the full year government target of 5% - to US$29.5 billion in the first ten months of the year. Electronics exports shrunk 3.4% to US$19.5 billion from US$20.2 billion last year. On the other hand, agricultural exports – notably coconut products, sugar, and raw coffee – increased 16.7% to US$1.5 billion from US$ 1.3 billion. Exports to most of the country’s top ten markets declined. Those bound for Japan, Hong Kong, China, and Taiwan, however, expanded by 6.8%, 38.0%, 55.0%, and 46.3%, respectively.