After drought and Sars, floods are the new problem

New figures show that the economy contracted 0.5% in the three months from January to March, broadly in line with predictions but well down on the 2.4% growth shown in October-December.

That still left gross domestic product 4.5% higher than it was in March last year, but the slowdown from 5.8% growth in the year to December was marked.

It could threaten the government's chances of making enough off tax receipts to reduce a budget deficit estimated at 4.5% of GDP, not to mention the government's own growth target of 4.2-5.2% in 2003.

Knock-on effect

Although the Philippines has escaped the worst of the deadly Sars respiratory virus, with only 12 cases and two deaths, thousands of Filipinos work in some of the hardest hit locations such as Hong Kong and Singapore.

Remittances from overseas workers make up a tenth of the Philippines' economy, and are important enough to have forced the pace of anti-money laundering reforms to avoid risking any interruption to the flow of money from overseas through the banking system.

Although they shot up 12.6% in the first quarter over last year's figure, the fear is that the Sars-linked downturn elsewhere will rebound on how much money makes it home. The flow of cash from Filipinos working in the Middle East is also a source of concern, given the discord in the region.

But besides Sars, the El Nino weather phenomenon is also having its ill-effects.

Agricultural output accounts for a fifth of the economy overall, and an El-Nino-related drought has hammered the farming business into a seasonally-adjusted 2% contraction from the October-December quarter.

Now, after two months of dry weather, tropical storm Linfa has turned the situation on its head.