Philippines: Flat Export Growth Forecast for 2008

Flat export growth forecast for 2008
This is from the Manila Tribune. While the high peso makes imports cheaper, it obviously creates difficulties for exporters. Also, the high peso means that US dollar earnings sent to the Philippines from abroad purchase fewer pesos. The Arroyo government is obviously overly optimistic in its predictions for export growth. That is not too surprising!

12/27/2007

With the peso strength expected to persist until next year and at the same time the specter of recession in the United States looms large, local firms project exports growth to be flat through next year.

The best that exporters can hope for is a 5-percent growth next year, according to Philippine Exporters Confederation president Sergio Ortiz-Luis Jr.

“We could not commit to the nine percent projection of government. Most of our members are already saying their exports may even decline due to the strengthening peso. They are also scared of a recession in the United States,” Ortiz-Luis added.

For this year, exporters said growth will only be four to 6 percent this year due to the rampaging peso, much lower than the government’s six to seven percent forecast.

He said even the call center industry is now paring down its projected income of $10 billion by 2015 and its projected manpower needs of 1 million by 2010. That sector contributed $3.5 billion to the $50 billion in total dollar revenues from goods and services exports last year.

Garments magnate and Philippine Chamber of Commerce and Industry chairman Donald Dee was equally pessimistic on the performance of the garments industry, the second biggest export product of the country.

“Garments exports already contracted by 12.29 percent from January to October this year. If the peso continues to appreciate and the US economy declines while costs are going up, we expect to be hit even harder by next year,” Dee said.

He said the hoped increase in exports to the recovering economy of Japan may even be dashed if the Philippine Senate rejects the Japan-Philippines Economic Partnership Agreement.

Semiconductor and Electronics Industries of the Philippines Inc. president Ernesto Santiago, said at worst, the nation’s top export industry may stay flat next year.

This was the revised projection of industry players in their last meeting, he said.

“At best, if the US can prevent a recession in the second half of next year, our industry may post a 5-percent growth,” Santiago said.

Semiconductor and electronics make up 60 percent of exports. Its most optimistic projection of 5 percent growth falls short of the 9-percent projection of the government.

Although semiconductor grew by 6.42 percent in the first 10 months of this year, the electronics segment of the industry declined by 30.86 percent this year partly due to the strong peso and partly due to the high cost of electric power, Santiago added.

For his part, Philippine Food Processors and Exporters (Philfoodex) president Bobby Amores doubted government statistics showing that food export was one of the few industries that grew this year.

“I don’t know where the government got its figures. What I know is that mango exports declined by 30 percent this year,” Amores said.

Food exporters are making shipments at a loss just to keep their buyers from ordering from other suppliers but they cannot sustain that without any relief, he said.

Gerardo Sicat, leader of the handicrafts industry, pointed out that the hard-hit handicrafts sector already declined by 1.53 percent this year due to the rejection of orders. There is no hope for growth from that end this coming year, he said.

George Barcelon, head of the footwear export industry, said his members have stopped giving out quotations to its buyers because of the continued decline of the dollar’s value against the peso.

On the whole, the export leaders expressed pessimism they can aim for the same export growth target that government officials have dreamt of.

“Six percent (growth) is still possible, I think within 4 to 6 percent. But next year, we have no idea yet, we have still to look at what’s happening. There are many ‘ifs’ to consider,” Ortiz-Luis Jr. said.

Ortiz-Luis said even if the November and December exports figures increased, these will not make a significant dent in improving total exports revenues for 2007.

The cumulative exports for the first 10 months only averaged 5.4 percent despite the double-digit 10.5-percent growth in October.

“The figures in October are deceptive. Ordered three months back when the dollar was valued at about P44 but paid when it was nearing P42 to the dollar, the October deliveries were made at a loss,” he volunteered.

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