SOMEBODY asked me that with the global economy bottomed out, how could I see recovery in light of the easing of oil and commodity prices?

I responded that it is too early to say that the global economy is improving. Just look at the subprime problem in the United States, which triggered the worldwide credit crunch. Recent reports say that losses from the subprime problem have reached $500 billion, and there are speculations that the amount could rise up to $1 trillion.

That would have serious impact throughout the world, including the Philippines, because of the domino effect since our banks don’t have substantial exposure in the US subprime market.

Another question—posed to me several weeks before the National Economic and Development Authority (Neda) released its report on the economy for the second quarter and first half of 2008—was: Do you think the economy is worsening, given the downscaling of growth projections by the government and by private analysts?

I responded: To me, anything above 5 percent is OK, considering the global crises.

And I was not surprised at all when the Neda figures came out: Gross domestic product (GDP) grew by only 4.6 percent in the second quarter of 2008, down from 8.3 percent in the same period last year; and by 4.6 percent in the first semester, down from 7.6 percent last year.

You know, it is easy to say—and this is true—that economic growth in the Philippines, as well as in its neighbors, was dragged down by high inflation and slower growth in developed economies, which are the major markets for our exports.

And it is also tempting to indulge in despair and comfort us in the thought that other countries did not do well, too. Southeast Asian powerhouse Singapore slowed down to 2.1-percent GDP growth in the second quarter of 2008 from 9.1 percent in the same period last year. Hong Kong grew by 4.2 percent, down from 6.2 percent. And we’re not so different from South Korea, which grew by 4.8 percent. Of course, Thailand and Indonesia did much better than us: 5.3 percent and 6.4 percent, respectively.

For businessmen, looking at factors beyond their control and finding comfort in the thought that everybody is in bad shape, it is a fatalistic and fatal response to the slowdown in the economy.

I don’t waste my time in self-pity or despair. I look at the root of the problem and seek not only the solution or proper response, but also the opportunity behind the problem. And I focus on the strengths behind the weaknesses.

Now, let us look at the numbers released by Neda. During the second quarter, the industry sector grew by 4.8 percent, down from 10.3 percent in the second quarter of 2007. Services grew by 4.3 percent, down from 8.4 percent. But the agriculture, fisheries and forestry sectors, remarkably, improved to 4.9 percent, compared with 4.2 percent last year.

Within the industry sector, the manufacturing sector posted an impressive performance with 6.1 percent growth in the second quarter (up from 3.4 percent) and 4.3 percent in the first semester (up from 3.7 percent).

The mining and quarrying subsector was the worst performer, posting negative 18.5 percent, a reversal from the 38.9-percent growth in the second quarter of 2007, and negative 5.3 percent for the first half from 28 percent growth last year.

Neda traced the decline to the decrease in exports to China, which reduced industrial activities in preparation for the Olympics. That means we can expect some improvement in the third and fourth quarters, hopefully, enough to cover the shortfall in the first two quarters.

Construction was also down. The reason: the negative growth of public construction—6.4 percent in the second quarter (from 59.4 percent growth in 2007) and negative 8.5 percent in the first half (from 43.4 percent last year, an election year).

However, private construction surged by 25 percent in the second quarter (up from 13.7 percent) and 14 percent in the first half (compared to 17.3 percent last year). The strong growth reflected the performance of the real-estate industry with gross revenues of 23.5 percent in the second quarter, second only to trade that posted a 24.1- percent growth in revenues.

Ownership of dwellings and real estate was the only subsector of the services sector that posted positive growth: 7.3 percent for the second quarter (up from 6 percent), as well as for the first half (up from 5.8 percent).

The big boost comes from remittances from overseas Filipinos who sent home $5.52 billion in the first semester, up 37.2 percent from $4.02 billion. Deployment of workers abroad grew by 33.9 percent to 354,735 from 264,942.

Agriculture, forestry, livestock and other crops posted negative growth rates. Coconut and sugar cane rebounded from negative to positive. Sugar cane, in particular, grew by 110.8 percent in the second quarter and 25 percent in the first semester, from negative 23.8 percent and negative 6.5 percent, respectively.

Corn grew by 24 percent in the second quarter, rebounding from negative 3.8 percent last year; it grew by 19.6 percent in the first half, compared to 5.7 percent a year ago.

I see something positive even in the obviously negative numbers. For instance, personal consumption expenditure was down to 3.4 percent in the second quarter and to 4.3 percent in the first half, from 5.6 percent and 5.7 percent, respectively, last year.

The slowdown was the natural reaction to the high prices, which drove up the inflation rate in the first six months, when oil prices reached $140 a barrel compared with $100 in December 2007.

The slowdown in consumption will help stabilize prices, encourage savings and should lead to lower inflation, which the Bangko Sentral ng Pilipinas considers and economists see as a major threat to long-term growth.

Behind the disappointing numbers (compared with 2007, which was a 31-year high in terms of GDP growth), we see a lot of strengths in the Philippine economy, which should help us sustain growth for the remainder of the year. As I have said, anything beyond 5 percent is OK, considering the crisis situation.

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