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NEDA expects better first quarter
Government now hopes GDP growth will be better in the first quarter this year versus the 3.2% growth a year ago. Last 14 March, NEDA Director-General Dante B. Canlas projected a 3.8-4.3% GDP growth for the quarter. The lower than expected inflation rate, which averaged 3.6% in the first two months, may push real GDP growth upwards. Last February, however, the government outlook was less upbeat. The National Statistical Coordination Board's index of 11 leading economic indicators pointed to a downward direction to negative 0.40 in the first quarter this year from negative 0.33 in the fourth quarter of 2001.

Looking into the demand components of growth, strong government spending is keeping the economy on track with its targets. Government consumption expenditures may have expanded by more than 3.0%, the public spending growth rate recorded in the first quarter of last year. Budget Secretary Emilia Boncodin said the fiscal deficit target is P52 billion for the first quarter since public expenditures have been frontloaded to settle P18 billion in payables to contractors during the period. This is expected to pump prime the economy by boosting construction activity. The actual fiscal deficit for the first two months has not yet been released since government is adjusting to a new accounting system prescribed by the Commission on Audit.

Turning to sources of output, agriculture, fishery, and forestry sectors continue to remain resilient. Agriculture performance has been aided by good weather, resulting in the lowest inflation in 23 months. With increasing harvested areas, the Bureau of Agricultural Statistics projected rice and corn output growth of 9.7% and 5.1%, respectively, in the first quarter. In January, jobs in agriculture expanded 7.4%, higher than 7.2% growth in services, and the 1.8% contraction in industry.

Secretary Canlas hope that construction and manufacturing growth will push industry growth way ahead of the 1.6% growth posted in the first quarter last year. Services will rely on the strength of telecommunications and retail sectors.

Despite these positive developments, signs of an early export recovery are still premature. The export slump has subsided to a minus 9% chance in January 2002 from minus 24.4% in December 2001. Even with recovery underway in the United States, however, January imports contracted by 18.7%. Electronic imports, in particular, shrank 19.2%.

The slowdown in domestic liquidity growth to 5.3% in January also indicates weak domestic demand. With regard to capital formation, companies are not yet expanding in the first quarter. The Bangko Sentral's Business Expectations Survey among top companies across major industry groups showed that businesses are operating at less than full capacity this quarter.

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