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May 29, 2008

Growth slips to 5.2% in Q1

Philippine economic growth skidded to 5.2 percent in the first quarter from a year ago, well below market expectations, as high inflation and a slowdown in the United States hit consumer demand at home and abroad, reported Reuters.

"Two factors, there was weak external demand and high oil and food prices," Augusto Santos, the economic planning chief was quoted by Reuters as commenting on the annual GDP growth data ahead of an official announcement.

Rocketing inflation and spluttering growth in the United States, a top export market, has brought the Philippine economy back down to earth after it roared to its best performance in over three decades last year with expansion of 7.3 percent.

The government expected growth of between 5.2 and 6.2 percent in the first quarter from a year before. On Wednesday, it downgraded full year growth prospects to 5.7-6.5 percent from an earlier 6.3-7.0 percent because of the twin effects of a slowdown in major trading partners in the West and high fuel and food prices at home hitting consumer demand.

The government also shelved this year's goal of a balanced budget, once the centrepiece of President Gloria Macapagal Arroyo's economic plan, and said it expected to be around $1.7 billion in the red as it hikes spending to support growth.

Additional debt will fund this year's deficit and Manila now aims to balance its books in 2010.

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