Tepid growth should serve as a challenge

With all the bad news in the past months, it's a pleasant surprise to learn that the economy managed to grow by 3.4 percent in the first quarter. Government economic managers admitted that the figure was slightly lower than the 3.8 percent projected growth in the gross domestic product for the first three months of the year. It is also way below the 6 percent average for the region, reinforcing observations that the Philippines is again lagging behind its neighbors in economic growth. Still, 3.4 percent is much higher than the 0.7 percent GDP growth posted in the first quarter of 1999.

Lackluster performance in the agriculture and services sectors dragged down growth. The government had expected 2.2 percent growth in agriculture but the sector expanded by only 0.2 percent. Services, on the other hand, grew by 3.8 percent, below the projected 4.8 percent. Efforts to contain the deficit also reduced government consumption by 1.9 percent. Industrial output, however, rose by 4.8 percent, higher than the projected 4.1 percent target.

What is surprising is that growth was achieved despite all the setbacks in the early part of the year, among them a series of fuel price increases and a stock market scandal that scared away investors. Government economic planners have reason to be optimistic that the target growth of 4 to 5 percent in GDP this year can still be attained, with agriculture putting in a better performance.

Economic figures for the rest of the year, however, will be affected by the Mindanao problem, the weakening of the peso and the continuing dull performance of the stock market. The Abu Sayyaf seized Philippine hostages, most of them children, from a school in Basilan near the end of March. A month later, a ferry sank, a plane crashed, and 21 mostly foreign hostages were seized in the Malaysian island of Sipadan. Since then, bombings have rocked Mindanao and Metro Manila and a plane was hijacked.

If such disasters continue to plague the country, the first quarter figures will be the best the government can achieve this year. There's hope in sight, though. A peace agreement may be reached with Muslim secessionists and the hostages may be freed. As for the other problems, the administration will have to show firm resolve in implementing reforms. The lower-than-expected GDP growth, behind Asia's dynamic economies, should serve as a challenge for the go-vernment and the nation to do better.