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El Niño could harm Philippine growth targets: NEDA

February 22, 2010

MANILA, PHILIPPINES – THE GOVERNMENT MAY HAVE TO REVIEW ITS GROWTH TARGETS THIS YEAR, PENDING MORE DATA ON THE SEVERITY OF THE ONGOING EL NIÑO PHENOMENON.
In an interview with reporters, Rolando Tungpalan of the economic planning agency said the government was keeping its growth targets of 2.6% to 3.6% for 2010–for now.
“The current target for the year of 2.6% to 3.6% takes into account the possible effects of El Niño,” the deputy director general of the National Economic Development Authority said.
But he stressed that the agency was closely monitoring data from the Department of Agriculture and preparing contingencies, should the situation take a turn for the worse.
“We have prepared contingencies for the worst, given the volatility of the weather nowadays. We will just have to be ready. We want to get the ground data on the effects on the micro level, then see if we would have to re-assess our targets,” he said.
Tungpalan explained that the worst case scenario would be delays in harvests would constrain food supply. This was the case during the food crisis in 2008.
“But for now it’s premature to say,” he noted.
However, he stressed that NEDA was in close coordination with the DA and DOST-Pagasa for data which would reflect any changes to this effect.
Other growth sources
Tungpalan pointed out that although the El Niño phenomenon could potentially harm growth, NEDA was still counting on the recovery of the industry and services sectors to bolster overall growth.
ATR Kim Eng analyst Luz Lorenzo agreed, citing the increasing share of the services sector to GDP since 1998, touted as the year when the country experienced the worst El Niño on record.
Based on Lorenzo’s data, services, which accounted for 45.1% of GDP in 1998, already accounts for 50% of GDP as of 2009.
Agriculture, on the other hand, which accounted for 19.5% of GDP in 1998, now only accounts for 18.1% of total economic output.
“In 1998, we had El Niño at the same time we had to face the Asian Financial Crisis. Right now, we’re experiencing El Niño again, but at the same time we’re also seeing a recovery from the global financial crisis. This time we’re not having the double whammy we had in 1998,” she stressed.
Bad for jobs
But Lorenzo noted that while El Niño would likely not have too much of an effect on overalll GDP, it would hit the country hardest in terms of employment.
She added that the agriculture sector accounts for around 40% of the total labor force of the country.
“We’ll probably see poverty levels rise. A big part of the workforce is from the agriculture sector, so we’ll definitely see incomes compromised as produiction levels slow down,” she said.
Lorenzo said that, alongside its contingency measures for El Niño, the government should ramp up efforts to improve the country’s irrigation system to help keep production steady even amid the dry spell.