Clouds of gloom have overtaken bright prospects for the economy this year. After President Arroyo took office in January, multilateral and private institutions and even the ordinary citizen expected better prospects for recovery from the political crisis in the last quarter of 2000. But those forecasts did not hold for long. When the economy performed below expectations in the first quarter, the government officially trimmed down its GDP growth targets to 3.3%-3.8% from 3.8%-4.3%.

In January to May, merchandise exports, which accounted for 44% of GDP in the first quarter, disappointingly shrank by 5.6% to US$13.4 billion from US$14.2 billion in the same period last year. Peace and order problems likewise depreciated the peso-dollar exchange rate by 4.8% and depressed the stock market index by 8.1% since the end of 2000. Low revenue collections widened the fiscal deficit by 71% to P58.3 billion. Amid this backdrop, private groups’ forecasts of GDP growth have been revised from an average of 3% to 2.7%. Read full article